Mr. Market Our Friend

Mr. Market Our Friend

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Many stock market legends have mentioned you several times that 'Stock Market is Always Right'. If market is upward or if market is downward. 

There are several driving factors which moves the market up or down like sentiments, news, earnings, greed & fear, political and geo-political tensions etc. But the direction in which market moves is always right. We need to adjust our views according to the market movement direction to get profitable trades. So, how to judge this market direction.

For understanding the market movement direction Sir Benjamin Graham have introduced a concept of imaginary investor Mr. Market in his book 'The Intelligent Investor' in 1949.

Mr. Market Introduction:

Mr. Market is a fictional investor who is greatly affected by panic, excitement, and disinterest on any particular day, and who made investment decisions based on his mood rather than fundamental or technical analysis. Mr. Market is indeed thought to be bipolar, shifting from periods of optimism to moods of  pessimism at random.

Working of Mr. Market:

Mr. Market is always eager to buy or sell a share based on how it has recent times increased or decreased in value. However, these decisions are based on emotion rather than good investing ideas as a result of previous developments.

Although Mr. Market is so emotional and moody, it provides opportunities for smart investors to enter and exit in market at advantageous situations. 

When Mr. Market becomes overly negative, good stock values will be advantageous to buy, allowing investors to buy them at a decent price compared to their future potential. Means when Mr. Market become pessimistic about market conditions, then it will offer $100 price share at the price of $60 or $70 at lower rates then shares actual price.

When Mr. Market is overconfident, it may better opportunity to sell the shares at an unjustified higher price. Means when Mr. Market become optimistic about market conditions, then it will offer $100 price share at a price of $120 or $130 at higher rates then shares actual price.

But as per Sir Benjamin Graham, in addition to Mr. Market mood, we should always first evaluate stock value through its fundamental analysis and then look after company's future prospects to decide for a purchase or sale of the shares. 

And try to grab these opportunities and conditions created by Mr. Market. We should buy when Mr. Market have a negative market outlook as shares will be available at cheaper price to us to buy and sell our shares when Mr. Market have a positive market outlook as we can sell our shares at higher prices to get more profit.


It's time to wrap up. So, we should do friendship with Mr. Market and take his help to decide our buy or sell views on shares. Mr. Market have negative market outlook we should get ready to buy shares and when Mr. Market have positive market outlook we should get ready to sell  our shares.

Disclaimer: This article is only for knowledge and information sharing purpose and not for any type of recommendation or promotion of anything or any website to anyone.

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