How Emotions will Induce Financial Market

C. L. Avadhani, Veni Lasya Jammalamadaka, Madhuri Atluri

Abstract: The financial markets are of pure logic and more a living playhouse where fear and greed take center part of every decision often freezing traders, whispers warnings of loss, luring into risk of financial gain and overconfidence. Every trade lies a story of hopes, dreams and fears but not just the numbers and charts. Mastering emotions is true art of trading; whenever there is volatility in the financial market and the investor should be wise enough not to travel by the emotions but synchronize the investment plan already made in line with market volatility and control emotions that may over run in that situation. The objective and principle of this article is how the emotions in addition to greed will play a role in financial market investment. Understanding market psychology enables better navigation of cycles, prioritizing risk-reward ratios over greed or fear. Investors should study company fundamentals and avoid hearsay-driven decisions, and this framework supports resilient strategies amid volatility. The aim is to identify nexus between greed and emotions that plays an important role in financial market investments. It examines historical events such as the Dot-Com Bubble, 2008 crisis, and COVID-19 market crash, as evidence of emotional influence. Recommendations emphasize emotional discipline for long-term wealth growth. Overconfidence leads investors to overestimate abilities, increases risks. Drawing on behavioral finance principles, the subject matter analyzes psychological biases like overconfidence, loss aversion that amplify market volatility. Study of fundamentals and technical analysis may start emotional pitfalls.

Keywords: Fear, Greed, Overconfidence, Risk vs Reward, Animal Spirits, Market cycles, Confirmation bias, Loss aversion, irrational investor behavior

How to Cite?: C. L. Avadhani, Veni Lasya Jammalamadaka, Madhuri Atluri, "How Emotions will Induce Financial Market", Volume 14 Issue 12, December 2025, International Journal of Science and Research (IJSR), Pages: 2008-2013, https://www.ijsr.net/getabstract.php?paperid=SR251223091847, DOI: https://dx.doi.org/10.21275/SR251223091847