Mass Psychology Introduction
Itís an old phenomenon but one that has only been brought
to light recently. It is something that is encoded in all
beings, we tend to feel comfortable doing things together.
One can even see this in other animals, a flock of birds a
herd of beasts, a shoal of fish etc they all seem to follow
Mass Psychology is the study of group behaviour; the mass
mindset draws comfort from the fact that everything is okay
because the majority support this view point. In other words
an investor feels comfortable buy technology stocks because
it appears that everyone thinks that high tech is the way to
The way to profit from this phenomenon is to do something
that is contrary to our upbringing and most of our cultures
and that is to resist the herd mentality and try to be a
leader. In any crowd, or group behaviour situation, the ones
that lead are the ones that draw all the benefits, while the
ones that follow blindly are the ones that take all the
risks. This is very clearly illustrated in the stock market.
Let's take the internet era of the 1990ís.
Investor who took the time to analyse what was going on,
could see that the internet would revolutionize the way
information was transmitted; the consumer would finally move
from the passenger seat to the drivers' seat. They also
noted with great interest that the public at that time was
against or completely ignoring this sector; this is a key
facet of mass psychology. They took positions in these
stocks as early as 1994 to early 1995, with the majority
taking stakes in 1996, the masses only began to awaken to
this phenomenon in mid to late 1998, by 1999, there was a
feeding frenzy as everyone simply piled in.
The leaders were alarmed at this behaviour, as they should
have been, since this frenzy was not sustainable. Knowing
that the end was near, they started to sell towards the end
of 1999 and move their assets into cash and bonds, while the
feeding frenzy continued. In March 2000 the markets started
to correct and by the end of the year the main up trend line
was violated and the market was ready to crash. By 2002 the
market had lost more than 70% of its value and many of the
masses who had momentarily tasted wealth were reduced to a
state of poverty that they could not have envisioned a few
1) The leaders represent less than 2% of the population yet
take in more than 90% of the profits. Getting to this stage
is not easy as it involves changing ones ingrained modes of.
2) You have to learn that whenever something is popular the
end is very near
3) That the time to take a position or start something new
is when it is viewed with extreme negativity and disdain.
4) You have to learn how to fight the fear of selling out to
fast after taking a position, remember it wonít just go up.,
most likely it could even go down a bit more or move
sideways for months or even a year. The one area you can
draw comfort from is this , the longer the sideways action
the more powerful the upward move will be when it finally
5) Keep extra money to take additional positions.
6) In all likelihood you will have a 50-100% retrenchment in
the first stage of the bull market, meaning that your shares
could double only to fall back to the original value you
purchased them at. This is usually known as the shakeout
stage, whereby the weak hands are forced out of their
positions and end up selling at rock bottom prices. Hold and
the rewards are extremely huge
7) When the investment suddenly becomes popular be on guard
and perform simple trend analysis on all your holdings, once
the super main up trend. Wait patiently for the next
opportunity to show up, there is always another opportunity.
This is meant to be a brief introduction into the very
esoteric but highly rewarding field of Mass psychology, to
do an in depth analysis would take months. When one combines
Mass psychology with Technical analysis you truly have a
very potent weapon that can be used very effectively to
position oneself in the right investments and consistently
be on the right side of the market.
was most likely derived from the study of mass psychology as
it basically means taking a position that is completely at
odds with the masses.
With that in mind, mass psychology has once more provided a
new opportunity in the financial markets for the astute
individual willing to take an early position and wait. The
sector that is going to explode in the next few years and
which has already seen very nice gains will be the commodity
sector, which will be spear headed by Gold and Silver.
Click on the following link for a more in depth look
the coming silver and gold raging
bull market . As they say a picture is worth a
1000 words. Be sure to read the section on why
Gold Is the Ultimate Currency
and why the powers to be fear Gold so much.
Now that you know the basics of how to profit by using Mass
psychology to your benefit, make sure you also read the
contrarian investing and
one key factor which is important to all stock market
traders and investors,
even the most successful trader is doomed to fail.
The leaders represent less than 2% of the
population yet take in more than 90% of the profits. Getting
to this stage is not easy as it involves changing ones
ingrained modes of behavior. Sol
an extensive reading of recent books by psychologists,
psychoanalysts, psychiatrists, and inspirationalists, I have
discovered that they all suffer from one or more of these
expression-complexes: italicizing, capitalizing,
exclamation-pointing, multiple-interrogating, and itemizing.
These are all forms of what the psychos themselves would
call, if they faced their condition frankly,
Rhetorical-Over-Compensation. James Thurber 1894-1961