Herd Mentality

Herd Mentality

Herd mentality refers to investors’ tendency to follow and mimic what other investors are doing. algostocks

This can lead to overinflated bubbles or unnecessary panics, as investors pile into or out of investments based on what they perceive others are doing rather than basing decisions on fundamental analysis.

Market Indicators of Sentiment

Several indicators can help gauge market sentiment. These include the Volatility Index (VIX), often referred to as the “fear index,” which measures market risk, fear, and stress. Other indicators include the Advance-Decline Line, Put/Call Ratio, and High-Low Index.

The Volatility Index (VIX)

The VIX measures the stock market’s expectation of volatility based on S&P 500 index options. A higher VIX value indicates increased fear or uncertainty in the market, while a lower value suggests confidence.