The Cycle of Market Emotions describes predictable investor sentiment phases influencing market cycles. It encompasses phases of maximum risk: Euphoria, Denial, Anxiety, Fear, Depression, Panic, Capitulation, Despondency; and phases of maximum opportunity: Despondency, Skepticism, Hope, Relief, Optimism, Excitement, Thrill, Euphoria. Recognizing these emotional phases enables investors to anticipate turning points, strategically buy at pessimistic extremes, and sell during peak optimism.
Emotional reactions in financial markets initially swing between extremes, such as maximum financial risk and maximum financial opportunity, driven by uncertainty or novelty. According to the Opponent Process Theory of Emotions, these intense initial states always give way to their opposites, consistently moderating and stabilizing investor behavior—allowing smart money to reliably capitalize on these predictable emotional shifts.
Emotional reactions in financial markets initially swing between extremes, such as maximum financial risk and maximum financial opportunity, driven by uncertainty or novelty. According to the Opponent Process Theory of Emotions, these intense initial states always give way to their opposites, consistently moderating and stabilizing investor behavior—allowing smart money to reliably capitalize on these predictable emotional shifts.