The fact is that markets move up and down in a cycle of oversold and overbought.
Investors inevitably push markets too far up as greed plays a key role in upwards momentum.
Conversely, investors let markets fall too far down as fear sets in. The trick is to recognize these trends, tops and bottoms and become smart about trading them. Greed will make you stay in the markets too long, while impatience will make you enter too soon. To exploit market psychology, you must act in a contrarian fashion, taking the contrary course when the crowd falls prey to its emotions. Extreme optimism will almost always coincide with market tops.