About Stock Market Crash

About Stock Market Crash

The Upside of a Stock Market Crash

Do you know ‘how does a stock market crash' or ‘is it possible to take advantage of a stock market crash'?

Although it may sound improbable, but it is easier to make money of a stock market crash than of a stock market surge. The answer to this strange phenomena lies in the two emotions that guides a stock market – FEAR and GREED.

The history of stock markets will tell us that a fall is much rapid than a rise. It is just like the old saying ‘the bulls need to walk up the stairs but the bears jump out the window'.

Now let us take a look at how a market crashes. A crash is usually triggered by fear. The infamous crash of 1929, the great depression, or the current economic crisis were all created by the simple four letter word – FEAR.

We often fail to register the investment of countless others when we invest in a stock market. And the fact that, majority of the markets money comes from big corporations and executives ,and not from us regular Jhons and Janes, seems to be forgotten as well.

We must understand that when we are investing on a market, most other investors have already been through either of the following two situations:

1. They have either bought the shares and have made a profit or incurred loss.

2. Or they already sold the shares for a profit and waiting for the opportune monment to buy them again.

So, how does this fear or paranoia gets into effect into a market? Let us assume we bought a share six months ago for $15 and now it is selling for $14. So, now we are actually hoping for the price to go up as we do not want to face a loss. However, countless other investors are actually on a profit of the same share as they have purchased it when the price was even lower. On top of that, they might have actually spent that perceived profit in their heads (they might have bought a new LED TV with that profit) already. So, when we want the price to rise so that we do not suffer a loss, they do not want their profit to disappear. So, this fear of loosing profit (LED TV) might trigger them to sell their shares. The fear then spreads among all such investors and chaos breaks loose while we still hope that things would get better.

Of course their are other factors other than fear that contribute to a market crash, but fear is usually the biggest culprit. Most of the investors that loose money on a market typically buy their shares during a strong market and are forced to share when the market is low. So, what can we do to avoid this sticky end? The answer lies in observation, education, and knowledge. While the fact remains that no one will be able to perfectly read the market by buying at the lowest and selling at the peak, we can easily observe the market and learn to buy during the bottom 30% and to sell during the top 30%. This way, we can become relatively successful investors.

Fear can be sensed and predicted very accurately by almost all of us as it has a certain stirring quality. So, we can easily pick up the sense of fear among the investors and capitalize on that opportunity to make some bucks for ourselves. This is why making money during a market crash is fairly simple and easy.

So, we must stop asking ourselves about what causes a market crash and start asking about how we can take advantage of such a crash?

Original article and pictures take stockmarkettips.pro site