As a short-term trader, your goal is to stay ahead, funneling their money from their pockets into yours. The better you predict the behavior of the masses, the more you can capitalize on their irrational decisions. The public is notorious for overreacting to media news. In an innovative study, behavioral economists examined how media coverage affects the masses. It's not as simple as you might think. A popular theory in behavioral economics is that the motivation for the public to buy and sell is a strong tendency to avoid regret and seek pride. These emotional inclinations often lead to irrational investment decisions. (For example, many investors persist in failing investments because they don't want to face failure and regret. Marking losses to paper delays the inevitable.)Good news can boost stock prices, and when good news leads to a rise in stock prices, most investors are eager to sell their shares, take profits, and bask in the glory of success.

However, research by behavioral economists suggests that things might be a bit more complex.

This may depend on the type of news investors hear, rather than whether it's good or bad news.

Experts have studied investors' reactions to two types of news: one is news about specific companies, and the other is news about the overall economy.

Good news, whether about a particular company or the general economy, can drive up stock prices.

One might think that no matter what kind of news drives up stock prices, the impact on the general public is the same.

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But behavioral economists have found that this type of news does matter.

If the good news is about a specific company, the general public tends to sell, but if the good news is general economic news, they will hold their ground.

Behavioral economists believe that bad economic news also has little impact on the behavior of the general public.

What are the psychological motivations behind the behavior of the masses?In the pursuit of pride and the avoidance of regret, the masses continuously monitor their positions, carefully considering whether their investments are good or bad. If a company has bad news, they often blame themselves for choosing the wrong investment company. They tend to believe that if they had done their homework, they could have chosen a better company. When they hear good or bad news about a company, it relates to their initial decision to invest in that company, and their reactions are emotional.

On the other hand, it's hard to blame yourself for an economic downturn. What can you do? An economic downturn affects all stocks, so the only thing you can do is avoid investing in the stock market. It doesn't matter which company investors decide to put their money into, because all companies are affected by the economic downturn. In this situation, the masses forgive themselves and do nothing. The impact of emotions on the masses is powerful.By seeking pride and avoiding regret, they allow their emotions to override their logic.

However, as a shrewd trader, maintaining objectivity is crucial.

Do not let your pride or regret influence you.

Let the crowd overreact.

When they do, take advantage of their irrational behavior and profit from it.