One of the simplest ways to get a feel of the market is the fear and greed index. Everyday I check this to get a birds eye view of market sentiment. You can check it out here. But why is this important? What is the fear and greed index?

According to Investopedia “The fear and greed index was developed by CNNMoney to measure two of the primary emotions that influence how much investors are willing to pay for stocks.” Simply put, Fear = Prices down; and Greed = Prices up. But why use these two emotions? These two emotions are the driving force of market sentiment. Fear means most investors have already sold or are preparing to sell. Whereas, Greed shows that most people are ready to buy if not, in the process of buying.

So how do you take advantage of having this data available? The human psyche can basically be summarized in two words. Herd Mentality. When investors/whales start selling, most people will sell to avert damaging losses. Same thing when those people start buying, regular people tend to follow suit in hopes of selling at a profit. Sounds just about right. I mean this is the underlying premise of Etoro.com right? You can copy traders who historically, have made good calls. They do all the work, you just make money while copying them. Sounds interesting.

But to the seasoned investor, this quote from Warren Buffet forms the mantra of their day to day. “Be fearful, when others are greedy, and greedy when others are fearful.” In short, go against the tide. Sell when people are getting greedy, and buy when they are afraid.

There is also a saying in stock market trading that goes like this “Buy the rumor, sell the news.” It is a well known indicator in trading that when news hits the stands, that it is already too late. This means the investors who bought the rumor are well on their way out, if not totally.

Belief is the underlying factor. This is the essence of trading (at least for long term holders). If you believe in the stock or crypto and what it represents, then this downward price action is an opportunity! You get to buy at a cheaper price thus maximizing profits when you sell.

When Tesla Motors was founded in 2003, you would’ve invested in the company if you believed that electric cars are the future. Lo and behold, 20 years later, Tesla holders are rich people indeed. From 15USD per share to now 199? I think it went up in the 300’s at one time.

Elon Musk buying Twitter was a perfect chance to buy more Tesla Shares. Why? Controversy after controversy emerged with the purchase. Not surprisingly affecting Tesla share price downward. Did the controversies diminish the need for electric cars and it’s upward trend? Highly unlikely. The utility is still there and will remain there for a long time. Will Musk be able to steer his company out of the choppy waters? Well, here’s the thing, Elon Musk has seen his fair share of controversies, yet, his companies still churn out high quality products even under these circumstances. And let’s not forget that he also owns SpaceX. Another company that is making great strides in the field of aerospace.

As long as you did your research then, believe. That is all you will need. I know it is hard (and scary at times), but this is part of the process.

DISCLAIMER: I am not a financial adviser and what you have read here is purely my opinion and may be used to further your own research. This is not financial advise. Cheers!