Mad Crowd Disease: Become a Better Trader or Investor: Understanding How Psychology, Behavior and Emotion Affect Financial Markets and Economy

by Charles Allen

The bloody fight between the bulls and the bears throughout the day is the cause of market swings back and forth. But what are the causes of these fights back and forth? There are a number of technical analysis tools and systems with the purpose of monitoring who is presently winning, as well as predicting who may win in the future, but they don’t address everything.

Markets move in response to other variables unrelated to true value and that’s where this book comes in. Warren Buffett had this advice in his 2004 Chairman’s “Investors should remember that excitement and expenses are their enemies. And if they insist on trying to time their participation in equities, they should try to be fearful when others are greedy and greedy only when others are fearful.”

The markets are largely moved by human psychology and groupthink. Many feel that they can become successful by following the crowd or mimicking others. People feel that if the majority of people are selling...they must know something I don’t. If all your friends jumped off a bridge...well, you know the rest. This book will help you understand and use the crowd, but not be influenced by it.

To begin to understand the psychology and behavior of the market you need to see it as a disorganized mass filled with a variety of people all expressing fear, hope, greed, optimism and pessimism. It’s a place where most individuals make decisions based on approximate rules of thumb and not always out of logic.

We look into why the majority of market participants make mistakes while some market participants continue to make rational decisions away from the crowd with success.

We have all been guilty of following the herd, using irrelevant reference points, chasing the latest trend, or overreacting to information along with everyone else. This is where learning the concepts of behavioral finance comes in. Behavioral finance comes from other related fields, like behavioral economics, all of which study the effects of psychology and sociology on financial decisions in the market. It also helps you learn how to better yourself at both trading (short term) and investing (long term) by using and understanding crowd behavior.

This book will help you break away from the common pitfalls of crowd behavior as well as common psychological pitfalls. Once the concepts are understood we will discuss ways of using crowds to make better choices instead of letting them make choices for us.

44 pages, Kindle Edition

Published October 31, 2017

About the author

Charles Allen is a British writer and historian. He was born in India, where several generations of his family served under the British Raj. His work focuses on India and South Asia in general. Allen's most notable work is Kipling Sahib, a biography of Rudyard Kipling. His most recent work, Ashoka: the Search for India's Lost Emperor, was published in February 2012.

Selected works:

Plain Tales from the Raj: Images of British India in the Twentieth Century (1975)
Raj: A Scrapbook of British India 1877–1947 (1977)
Tales from the Dark Continent: Images of British Colonial Africa in the Twentieth Century (1979)
A Mountain in Tibet: The Search for Mount Kailas and the Sources of the Great Rivers of India (1982)
Tales from the South China Seas: Images of the British in South-East Asia in the Twentieth Century (1983)
Lives of the Indian Princes, with co-author Sharada Dwivedi (1984)
Kipling's Kingdom: His Best Indian Stories (1987)
A Glimpse of the Burning Plain: Leaves from the Journals of Charlotte Canning (1986)
A Soldier of the Company: Life of an Indian Ensign 1833–43 (1988)
Architecture of the British Empire, Ed. R. Fermor-Hesketh (1989)
The Savage Wars of Peace: Soldiers' Voices 1945–1989 (1990)
Thunder and Lightning: The RAF in the Gulf War (1991)
The Search for Shangri-La: A Journey into Tibetan History (1999)
India Through the Lens: Photography 1840–1911, Ed. Vidya Dehejia (2000)
Soldier Sahibs: The Men who Made the North-west Frontier (2000)
The Buddha and the Sahibs: The Men who Discovered India's Lost Religion (2002)
Duel in the Snows: The True Story of the Younghusband Mission to Lhasa (2004)
Maharajas: Resonance from the Past (2005)
God's Terrorists: The Wahhabi Cult and the Hidden Roots of Modern Jihad (2006)
Kipling Sahib: India and the Making of Rudyard Kipling (2007)
The Buddha and Dr Führer: An Archaeological Scandal (2008)
The Taj at Apollo Bunder: The History of the Taj Mahal Palace, Mumbai, with co-author Sharada Dwivedi (2011)
Ashoka: The Search for India's Lost Emperor (2012)