Market sentiment can be divided into two types: optimism and pessimism, which alternate in the market, triggering the so-called market sentiment cycle.

Optimism often accompanies a rise in the stock market, and investors are confident and willing to take more risks, which drives up stock prices. At this time, people are more willing to invest, and market transactions are active, driving the growth of the overall economy. However, excessive optimism may also lead to market bubbles and eventually a crash.

On the contrary, pessimism often occurs when the market falls, and investors panic and sell stocks to avoid risks.

This sentiment often leads to further declines in the market, forming a vicious cycle.

But at the same time, for rational investors, pessimism may also be a good time to find undervalued stocks.

When market sentiment is too extreme, it may cause investors to misjudge market trends, resulting in losses. In investment, rational and calm thinking is very important.