Psychology Plays a Vital Role in Markets!

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A beautiful e.g of Anchoring Bias shared 👇

A guy bought Tata Motors at ₹300. 

It touched ₹1170. 

He held on. 

Now it’s at ₹630. 

He is now unsure whether to hold, sell, or buy more.

No, this thread isn’t about Tata Motors.

This is about your mindset.

Because the biggest mistake wasn’t holding the stock.

It was anchoring his emotions to a number.

Let’s break it down:

In 1975, psychologists Tversky and Kahneman discovered:

Humans aren’t rational. 

They’re emotional.

The moment we see a price—any price—our brain treats it as a reference point for everything that follows.

So when Tata Motors hit ₹1170, his brain locked that in.

From that point on, anything lower feels like a “loss.”

Even ₹635, which is still 100% above his purchase price.

This is called: Anchoring Bias.

It makes you blind to present value.

And a prisoner of past numbers.

Now add another sneaky psychological trap: The Endowment Effect

He didn’t just “buy” Tata Motors.

He owned it.

He attached emotion to it.

He made it personal.

And the moment something becomes “yours,”

you overvalue it, irrationally.

So you hold on longer than you should.

Because selling it feels like giving up a piece of your identity.

Here’s the paradox:

When the stock is with you → ₹635 feels “too low” to sell

When you don’t own it → ₹635 feels “too high” to buy

Same price.

Different emotion.

Same irrational trap.

So what’s the solution?

I asked him:

“If he didn’t own Tata Motors, would he buy it today at ₹635?”

If the answer is YES — then hold.

If the answer is NO — then sell and redeploy that capital better.

That’s not emotion.

That’s logic.

The market doesn't care:

>How much did you buy a stock for

>How high it once went

>How long you held it

It only asks:

 “Is this the best place for your money RIGHT NOW?”

If not — move.

No guilt. No grief.

Because the truth is:

You’ll never sell at the top.

You’ll never buy at the bottom.

But if you master your mind,

You’ll always protect your capital.

That’s how wealth is built.

Not by holding tight, but by letting go — at the right time.

Anchoring Bias traps your decisions.

Endowment Effect clouds your judgment.

Emotional attachment kills your returns.

Escape all three.

By asking one honest question:

Would I buy this today?

Over 95% of investors underperform the index.

Not because of bad stocks.

But because of bad psychology.

Learn the Game.

Or be Played by it.