Decoding Market Mind Games – Mayank Yadav

Mayank Yadav (ITBM 2021-23)

In 2020, the Covid19 pandemic gave many Gen Z people and Millennials exposure to the intense market crash. The market crash of March 20 attracted many new first-time traders and investors. According to the data from the Securities and Exchange Board of India (SEBI), the number of new Demat accounts being opened during April 2020 and January 2021 broke all records. The data suggested that Indians opened as many as around 10.7 million new Demat accounts during this period. In fact, in FY20, the total number of new Demat accounts opened was just about 4.7 million.

This new population of traders got exposure to vast financial knowledge through the internet. It majorly focuses on fundamental and technical aspects. But I would like to add a quote by Charles R. Swindoll.

“Life is 10% what happens to you and 90% how you react to it.”

This quote explains our way of looking at the market is more of an object view. But in reality, it is the minds’ subjective interpretation. 

In the market, we need financial capital. To handle that capital wisely, we need another capital which is emotional capital. Investing depends upon the new psychology of risk, uncertainty, and decision-making.

As Markowitz’s states in the first part of his Modern portfolio theory, 

"The process of selecting a portfolio may be divided into two stages. The first stage starts with 
observation and experience and ends with beliefs about the future performances of available 
securities. The second stage starts with the relevant beliefs about future performances and ends 
with the choice of a portfolio."

Several times, the guy regarded as one of the fathers of today’s quantitative revolution informed us that everything, we do with numbers is linked to our values and beliefs. The data creates our beliefs about the market context, which are about the self-perceived reality. 

Whenever we try to make a trade, it is backed by the emotions we experienced through market investing or trading environments. The more you gain experience, the more intuitive you become. It is the robust set of emotions that create that strong memory and fits it in our brain. Eventually, this helps us in making better decisions in a longer time frame. Therefore, whenever we break some rules and incur some losses, we should accept them. While keeping this in mind, as stated by Denise Shull

“Feel what you feel as much as you can feel.”

Exercising this helps our brain to sync this feeling with reality. However, how much worse it is.

In investing or trading, fundamental and technical analyses are not enough. If we lack feeling and emotion, we won’t be able to apply math or reasoning, let alone perform other studies, make judgments, or make decisions. Individuals who are better at identifing and distinguishing among their current feelings can achieve higher decision-making performance. This suggests that whether their emotions are beneficial or harmful to decisions may largely depend upon how people experience, treat and use their feelings during decision making. There are virtually infinite choices to decide when to sell or buy. Certainty and truth are impossible to achieve.

Denise Shull mentioned, 

"It gets said without anyone actually saying it—somewhere there is a mysterious formula for the 
truth in the market and all assets traded on one. We semiconsciously keep looking for it and that is a waste of time—time which can be better spent putting our numbers into the proper context."

I would like to mention the key takeaway for this article with following statement,

Make a conscious decision to consider the social/human context in which you examine your facts, projections, or probability. Do this first for yourself as a risk management tool to see what emotional and social influences are at play, and then as a planning tool to comprehend market action.

Here is one bonus quote from Denise Shull,

“Everyone spends all their time searching for what everyone else doesn’t know, when a lot more money can be made searching for what others are about to know.”


1)Market Mind Games: Profiting from the New Psychology of investing trading and risk by Denise Shull.

2) Quote by Charles R. Swindoll: “Life is 10% what happens to ….

3)Portfolio Selection by Harry Markowitz The Journal of Finance Vol. 7, No. 1 (Mar., 1952), pp. 77-91 (15 pages) Published By: Wiley

4) New demat accounts jump to a record high in FY21.

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