When we delve into the world of trading, we begin to realize that a significant part of it, around 95%, hinges on psychology. There’s a recurring scenario that happens all too often: traders who possess the acuity to pinpoint the absolute bottom of a downturn, investing heavily, yet they falter when the market begins to go their way.

This pattern is surprisingly common. A trader may spot an emerging trend early, positioning themselves optimally. But when the rest of the market begins to lean in the same direction, they start to doubt their position. There’s this erroneous belief that everyone cannot win simultaneously, which can cause the trader to abandon their initial stance. As a result, when the market keeps climbing, they’re left confused and erroneously attribute the climb to a market anomaly.

The trader then makes a move to short the market, failing to realize that their original long position target is still unfulfilled, and the current price is still lower. This move often leads to liquidation when the price peaks.

One thing I can’t stress enough is that predicting market trends is considerably simpler than effectively managing the trade and, more importantly, managing one’s emotions. Often, this crucial aspect of trading is overlooked, overshadowed by market prediction models and short-term victories.

Interestingly, emotions don’t merely influence individual successes or failures; they’re a primary driving force behind market dynamics. This is why the idea of algorithms dominating the market seems rather simplistic. While algorithms and automated trading systems play a role, the crux of the market lies in human emotions and decision-making.

Historically, significant market trends and extreme price movements are largely driven by human-induced long or short squeezes. A good example of this is the bitcoin market, where the ‘bitcoin people’, if you will, drive the direction of the market.

Sure, there can be periods of abnormalities where market makers resort to unscrupulous practices, but these instances are generally deviations from the norm. The market has a tendency to self-correct, always reverting back to its fundamental essence: a platform embodying human sentiments, strategies, and actions.

So, the key to successful trading lies in understanding and managing our psychological impulses, sticking to our strategic decisions, and being aware of the emotional currents of the market.