I was a bit late but I definitely made a point to binge-watch \u2018Squid games\u2019!<\/p>\n\n\n\n
And it was mind-blowing!<\/p>\n\n\n\n
Especially when the character of X said, \u201cYou are allowed to move forward when \u2018it\u2019 shouts out, \u2018Green Light\u2019 stop when \u2018it\u2019 shouts \u2018Red Light.\u2019 If your movement is detected afterwards, you will be eliminated\u201d!<\/p>\n\n\n\n
It then struck me that; this is exactly what happened to an investor in the stock market.<\/p>\n\n\n\n
The rule for the stock market says, \u201cYou are allowed to buy stocks when \u2018it\u2019 shouts out, \u2018Green Light\u2019 sell when \u2018it\u2019 shouts \u2018Red Light.\u2019\u201d!, but 99% of the investors\/traders make the mistake of buying stocks when the market turns \u2018Red\u2019. <\/p>\n\n\n\n
Which is definitely an alarming call!<\/p>\n\n\n\n
What caught my eyes, is the way, humans bring emotions and they think \u2018emotions could save them\u2019 Traders\/Investors in the market have a striking resemblance from the emotional perspective.<\/p>\n\n\n\n
They think we can become the other person by simply enacting their moves. <\/p>\n\n\n\n
Market participants follow the same trend of following a successful investors strategy without realising that their technical parameters are different than that of a successful investor.<\/p>\n\n\n\n
The plot of the series starts with a random guy stimulating curiosity by card flipping. <\/p>\n\n\n\n
Where he\u2019d slap the player if he wins, and pay $100 if he loses. <\/p>\n\n\n\n
Here the He the guy actually ends up paying the players. <\/p>\n\n\n\n
Then, players are taken to a remote island where they have no clue what is inviting death in the form of a game they\u2019ll play, tied with hopes of potentially winning a lottery.<\/p>\n\n\n\n
There would be no denying the fact if we say the stock market is a \u2018game\u2019.<\/p>\n\n\n\n Market participants enter this game arena only based on curiosity!<\/p>\n\n\n\n They are not aware of what game they\u2019re playing, and what rules should be actively looked upon.<\/p>\n\n\n\n The \u2018subway guy’ character of invoking curiosity are the people surrounding us in the form of relatives, neighbours, friends etc.<\/p>\n\n\n\n Based on their so-called \u2018successful trading\/investing\u2019 stories we are dragged into the stock market But if a similar situation continues it’s just gambling!<\/p>\n\n\n\n This is because \u2018this feeling of lucky\u2019 makes you overconfident and one goes into attribution bias. It instils excessive trust in the investor\u2019s decisions which becomes a plan gamble eroding the cognitive sprits. <\/p>\n\n\n\n This leads to overtrading and eroding the capital. <\/p>\n\n\n\n Overconfident traders neglect all analysis and forget about diversification. <\/p>\n\n\n\n They hardly listen to other people, and tend to choose the stocks they \u2018start falling in love with\u2019. So when they\u2019re in profit, they think that it\u2019s all thanks to their amazing prediction. <\/p>\n\n\n\n When they\u2019re at a loss, it\u2019s because the market was in an unfavourable situation, or simply because they were unlucky. <\/p>\n\n\n\n Essentially, it\u2019s pacifying oneself irrespective of the situation. When players play \u2018Red Light Green Light\u2019, they are shocked to see other players get massacred. <\/p>\n\n\n\n After the game is over, they later vote whether they want to continue playing the game or not. <\/p>\n\n\n\n The surviving players fall into the trap of overconfidence. Mathematically, every player has a 0.22% chance of survival, which is very low.<\/p>\n\n\n\n Blindfolded with overconfidence, they start thinking that \u2018I have been chosen\u2019 and that if I can flip cards easily this should be just as easy. <\/p>\n\n\n\n Therefore, according to them, this game should be an easy win. <\/p>\n\n\n\n Lotteries work in the same way, in which people bet on a probable cause that is close to impossible. <\/p>\n\n\n\n Sadly, most people approach investing like gambling. And psychologically they are forced to do because they think it is the only way of survival and there is no other option better than this. Instead of trading based on their own trading rules, strategies, and analyses, they simply follow the actions of such people because they somehow know they couldn\u2019t be mistaken.<\/p>\n\n\n\n These are the people who end up panic trading, and falling victim to scam schemes claiming quick money. One wrong step, making the wrong decisions indicates that we lose money. <\/p>\n\n\n\n Just like how most people in the Squid Game end up dying, there are many other people who entered the market with dreams of becoming a millionaire, only to lose everything. <\/p>\n\n\n\n But unlike the Squid Game, the financial markets are real, it\u2019s not a winner-takes-all. <\/p>\n\n\n\n If you can understand the characteristics and rules of each market, and do your HOMEWORK you definitely excel strategically. <\/p>\n\n\n\n The point is parameters are the same, perhaps universal, but the approach and attitude vary.<\/p>\n\n\n\n
What were they thinking?<\/strong><\/p>\n\n\n\n
People try to duplicate their portfolios by buying stocks in a similar manner to their friends and acquaintances without doing any due diligence. <\/p>\n\n\n\n
When the stocks you bought favours your portfolio, you feel blessed and say you are lucky!<\/p>\n\n\n\n
Investing and Overconfidence is a bad combination!<\/p>\n\n\n\n
Such biased nature is because people find reasons for their own and others\u2019 behaviours. <\/p>\n\n\n\n
Herd Mentality <\/strong>
Herd Mentality is accurately reflected in Squid Game. <\/p>\n\n\n\n
The bet is, one of the last people surviving out of 456 people wins and claims the prize money. <\/p>\n\n\n\n
Herd mentality is when people follow the actions and behaviours of whom they think is their leader in the groups. <\/p>\n\n\n\n
The same psychological characteristics is seen in a retail trader\/investor who tries to mimic an influential\/successful trader\/investor.<\/p>\n\n\n\n
Conclusion<\/strong>
More than the actual analysis, psychological phenomena play a vital role in the right decisions for a market participant<\/a>.<\/p>\n\n\n\n