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Posted on Tuesday, January 19, 2010 in Play Well - Be Heard

Old Stock

Have you ever wondered "how a stock market cash" or "might take advantage of a stock market crash?

Did you know that is easier to make money in falling stock market than it is in a raging bull market – Why? Because investment stock is driven by two emotions

Fear & GREED

If you look at the public market history and charts the old stock market will realize that the stock market index falls much faster than it rises. There's an old saying that "the bulls have to walk down the stairs, but the bears jump out the window. "So again, let's look at the question of how does a stock market crash.

The main reason behind of a stock market crash is fear. If it was the stock market crash of 1929, the Great Depression or the current credit crisis we are experiencing, whether in the U.S., Australia or Iceland, the main reason behind the accident is fear.

When investing in stocks or stock advice people often forget to think about all other investors who are doing exactly the same. In addition most of the money invested in the market does not come from mom and dad business, but large investors and fund managers.

Every time you buy shares you are buying at a time when investors have two other things

1.They already bought stocks and are sitting on a gain or loss.
2.They have already sold the shares at a profit and loss, and is looking at the right time to buy again.

With this in mind, let's assume that you buy the stock at $ 20. 6 months ago this share was trading at $ 14 and that has gradually risen to $ 20 and expected to continue rising. Sabes own share as all investors who had bought, but there is a difference – Other theses investors are sitting on profit. So we are seeing the stock price like a hawk, because the last thing they want is a drop the bag to come and wipe out their profits. To make matters worse most investors are not only thinking about profit, but they have already passed the benefit on their heads. So when the stock price begins to turn around what you think "OK, I'm sure he'll come good" – while they are thinking "Oh, no I do not want to lose my benefits (new car) I'd better sell. This fear of losing benefits and begins to grow more and more people will start jumping the train – Apart from you who bought at the top, he is still saying "I think it's going to turn around."

So how does a crash the bag? Of course there are many contributing factors but the fear is undoubtedly the largest. Unfortunately for most investors end up losing money because typically buy when the market is high and sell when the market is low.

So how not to fall into this trap? Just for knowledge, education and experience. Nobody will be able to time the market well (buying low and selling at the peak) or Warren Buffet does. But if you can buy in the bottom 30% of market and sell over 30% will fare better along the way to becoming a successful investor.

What about making money when the market is failing? I said before that you can actually make money during this period and that is true. Why? Because fear is much easier to predict than greed therefore the market moves faster. So if you know some very simple strategies that really will be able to make huge profits in the quarter of the time.

So maybe the question you should ask is how the stock market crash, but how can I take advantage of a stock market crash?

About the Author:

Would you like to learn how to not only survive the 2009 Stock Market Crash but actually profit from it? Receive your FREE DVD Today

Article Source: ArticlesBase.comHow Does a Stock Market Crash?

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