Pakistan Stock Exchange dropped for almost three months straight. Then yesterday, it surged 9.32% in a single day. If both of these events confused you, this thread will fix that permanently. Markets do not move on fundamentals in the short term. They move on psychology. And once you understand the three forces that drive every rally and every correction, you will never panic in either direction again. 🧵👇 The first force is called loss aversion. Kahneman and Tversky proved decades ago that the pain of losing Rs. 100 is psychologically twice as intense as the pleasure of gaining Rs. 100. This is why PSX fell for three months even though most companies were reporting decent earnings. Investors were sitting on large unrealized gains after an 80 to 90 percent rally and their brains started whispering the same thing. What if I lose all of this. That fear of giving back profits is biologically stronger than the greed that drove them in. So they sold. Not because anything changed in the fundamentals. But because their nervous system could not tolerate the idea of watching gains evaporate. Then a ceasefire was announced and the same investors rushed back in so aggressively that the exchange had to halt trading. Same people. Same stocks. Same fundamentals. The only thing that changed was the emotion.👇