Happy Friday, traders…

Ben here.

Today, I have a simple question for you: What exactly causes the most dramatic moves in stock prices?

You’re probably thinking about the Fed, corporate earnings, and news, but that’s wrong…

More than anything else, stock prices are driven by emotions. 

Most buying and selling happens because of how traders feel about a particular company, sector, or fund. 

(Remember the Holy Trinity of Trading Psychology — head, heart, and hands.) 

Your response to anything in life has a lot to do with your emotional state at the time. The stock market is no different. 

Understanding how the collective psychology of market participants affects prices can give you a priceless edge as a trader.

After teaching thousands of students, I’m convinced that most traders’ ‘Achilles heels’ come down to mindset, not fundamentals or technical analysis. 

With that in mind, let me show you how the best traders in the world use emotion to predict market movements and improve their strategies… 

The Single Biggest Influence on Share Price

First, you need to understand what a “share price” really is — and how emotions can influence it.

A share price is simply a representation of the collective emotional view of a company.

In other words, what we think about that company is demonstrated in the price it’s trading for. 

Economics 101, this is simple supply and demand. 

Think about after-market concert tickets. If the band just released a bad album, their tickets probably aren’t gonna fly off the shelves.

But if Taylor Swift announces a show tonight, you can bet that the emotions of her fans will drive them to pay just about anything to get to the show. 

Now, let’s compare this to corporate earnings. If a company reports bad earnings, the share price generally goes down. 

This is just like the band with the bad album trying to sell tickets — demand is low because no one is emotionally driven to buy the stock.

And speaking of earnings…

If you want access to my brand-new trading system which can accurately predict earnings moves before they happen — Click here now to join Operation: Master Calendar!

The Cycle of Fear and Greed

Knowing that share prices come from emotion will do you no good if you can’t put that knowledge into action — and turn it into profits. 

And the next step to doing so is understanding the cycle of fear and greed in the market.

You see, our emotions try to play tricks on us when we’re trading…

To most people, it feels better to buy stocks when they’re going up than it does to buy them when they’re getting destroyed.

But if you want to beat the market and create an edge, you need to re-program your brain to do the opposite…

This is the S&P 500 chart going all the way back to 1900. 

Notice that the best times to buy stocks were the periods of the most palpable fear…

The Great Depression, the Vietnam War, the 2008 financial crisis, the COVID-19 pandemic — if you had gone long at any of these points on the chart, you would’ve made a fortune.

You can also apply the same kind of emotional analysis to short-term options trading.

If you see a former runner pulling back to an important level and holding it, consider buying some calls. 

Violent snapbacks off of the lows are the best call-buying opportunities … period.

The contract prices get extremely beaten down during the sell-off, creating enormous potential upside during the snapback.

This is exactly what I did with my NVDA trade this week: I bought calls at a key level (after the chart had taken a big dip from $120 to $105. 

We’ve all heard “buy low, sell high,” but many traders forget about this crucial rule in the moment.

Try to keep the cycle of fear and greed in mind as you’re trading and I bet you’ll find some great setups (that greedy traders are missing out on).

The Cycle of Market Emojis illustrates this concept perfectly…

Traders buy and sell stocks based on how they’re feeling.

These dynamics are apparent in all risk assets from options, to crypto, and even bonds. 

If you know what to look for, you can see the cycle of market emotions in both long-term and short-term charts.

By correctly identifying the peaks and valleys of trader emotion — and connecting them to breakouts and pullbacks in individual stock charts — you’ll increase the probability of making profitable trades.

Before we go, let’s look at:

💰The Biggest Smart-Money Bets of the Day💰

• $39 million bullish bet on DAL 09/20/2024 $35 calls @ $4.35 avg. (seen on 9/5)

• $9.6 million bullish bet on TSLA 9/13/2024 $242.50 calls @ $3.15 avg. (seen on 9/5)

• $9.5 million bullish bet on MSTR 09/13/2024 $132 calls @ $2.72 avg. (seen on 9/5)

Happy trading,

Ben Sturgill

P.S. Still struggling with the mental game of trading? 

Let’s do something about it…

Starting in mid-September, I’ll be hosting twice-a-week webinars about the psychology of trading.

We’ll learn to master our mindsets and control our emotions together.

Stay tuned for more details coming soon…

P.P.S. In the meantime, there are hundreds of ‘smart money’ sweeps to choose from every day on my Spyder Scanner.

Join Danny Phee THIS SUNDAY, September 8 at 1 p.m. EST to see the most promising options bets of the week. 

Seats are limited — Reserve yours before it’s too late!

*Past performance does not indicate future results