Why We Sell at the Bottom and Buy at the Top: Five Cognitive Errors Tehran's 1399 Bull Market Taught by the Book (Friday, 31 July 2026)

Nobody queues outside a shop because prices went up, and nobody flees because there is a sale. In the stock market, precisely that happens. TEDPIX, the Tehran Stock Exchange all share index, closed at 5,075,098 points on Wednesday, 29 July 2026; a level many of those who entered the market in 1399 (the Iranian year running from March 2020 to March 2021) never saw, because they had sold at the bottom years before it arrived.

The reason for this contradiction is not that investors are foolish. It is that the human brain evolved to survive on the African savannah, not to reason about price to earnings ratios. This report unpacks the five cognitive errors that build the "buy high, sell low" machine, and the structures that let you route around them.

Background: Tehran's 1399 bull market as a live laboratory

If one example of behavioral finance in Iran had to be chosen for a textbook, the year 1399 is the most complete. In its first half, TEDPIX posted an unprecedented run. Media spoke of a market that "only ever goes up", new brokerage codes were issued in the millions, and people who had never read a financial statement entered the market.

Then, in Mordad 1399 (roughly August 2020), the trend reversed and a long decline began, one that took years to recover from. The key point: the heaviest retail money inflow happened in the months nearest the top, and the heaviest outflow in the months nearest the bottom. This pattern is not specific to Iran; it repeats in every market in the world.

The same psychological mechanism shows up on a daily scale too. Sahmino's earlier reporting on the psychological root of a single session's selling wave examined how the gap between systematic risk and fundamental value tends to be filled by emotion rather than analysis; the full archive sits in our analysis section.

The numbers behind every decision made today

Taken together these four figures say one thing: in an economy with inflation near 89 percent and a risk free return of 23 percent, the cost of an emotional decision is not merely a nominal loss; it is years of purchasing power.

The five errors that build this outcome

1. Loss aversion

Daniel Kahneman and Amos Tversky showed that the pain of losing 100,000 tomans is roughly twice the pleasure of gaining 100,000 tomans. The practical consequence of that asymmetry is strange: an investor holds the losing position, because selling means "locking in failure", and sells the winning position early, because they want to lock in the pleasure of a win.

The result is the exact inverse of logic: the portfolio fills with losers and empties of winners. This is the only error that strikes from both sides at once, cutting gains short while stretching losses out.

2. Anchoring

The price you bought at is of no importance whatsoever to the market. Your brain, however, records it as the "real price". The sentence "I will wait until it comes back to my entry, then sell" is a perfect specimen of this error.

The share does not know what you paid for it. The only correct question is: given today's information, is this asset worth holding? That same anchor is what makes simple figures such as the price to earnings ratio so widely misread.

3. Herding

When everyone is buying, not buying feels like a mistake. This is not a character flaw but a survival mechanism: in nature, the individual who did not move with the herd had a lower chance of staying alive.

In markets, that mechanism runs in reverse. The broader the consensus, the higher the likelihood that the good news is already in the price. At the 1399 top, consensus was at its historical maximum.

4. Confirmation bias

After buying a share, you unconsciously see only positive news about it and dismiss the negative as "rumour". Messaging groups amplify this, because they are usually made up of people holding the same share, with both a psychological and a financial incentive to reinforce the positive story.

A practical exercise: before every purchase, write down honestly, "what would have to happen for me to know I was wrong?" If you have no answer to that question, you have no analysis either. The answer usually comes out of the financial statements themselves.

5. The illusion of control

After a few successful trades in a rising market, a person attributes the profit to their own skill rather than to market conditions. That error leads them to size up on the next round, precisely when risk is higher.

The bitter rule: in a bull market, everyone is a genius. Separating skill from luck only becomes possible after a downturn.

What actually helps

Market psychology cannot be cured, because these errors are part of the brain's architecture. But they can be routed around with structure:

• Set rules before the emotion arrives. Make decisions when the market is closed and your mind is calm, not during trading hours.
• Write down the reason for every decision. A simple notebook recording why you bought and what would invalidate your thesis. Three months later, reading those notes is the most instructive thing you can do.
• Define the time horizon at the outset. Most heavy losses come from entering a long term investment with short term money, then being forced to sell at the worst possible moment.
• Accept that calling tops and bottoms is impossible. Anyone claiming to know what the market does tomorrow is either wrong or selling something.

Outlook

None of these five errors fades with time; in every fresh upcycle the same pattern repeats with new players. What can change is the share of people who wrote down their exit rule before entering. The 1399 experience did that for part of the market, but the newest cohort of entrants never lived through it. Sahmino's Learn section exists for exactly that gap.

Conclusion

The market is a machine for transferring wealth from the impatient to the patient, and that old line is about psychology far more than economics. Information today is available to everyone: financial statements sit on Codal, prices are live, analysis is free. What differs is not access to data but the ability to decide in the moment when everyone else is shouting.

If only one thing survives from this report, let it be the number two: as long as the pain of a loss carries twice the weight of an equivalent gain, a portfolio without a written rule drifts by itself toward holding the losers and selling the winners.

What to watch

• Retail money inflow and outflow in the months after any sharp jump in TEDPIX.
• The gap between the all share index and the equal weighted index, as a signal of how broad or concentrated the enthusiasm is.
• The volume of new brokerage codes issued during rising phases.
• The ratio of bank deposit rates to the inflation rate, which sets the opportunity cost of staying in cash.

This material is educational and analytical and does not constitute investment advice.