"Psychological horror movies use disturbed mental states to scare or unsettle the audience. These movies play off anxious energy, and are often uncomfortable to watch. Psychological horror movies are uncomfortable to watch in an abstract, or cerebral, way. Gore, jump scares, and graphic violence take a back seat; the dark depths of the human mind come to the forefront.
Suspense is key storytelling technique used in psychological horror movies. The suspense, though, is often not one that asks: What will happen next? It's more a lingering anxiety about what is going on, an atmosphere of horror.
For example, Ari Aster's Midsommar (2019) is psychological horror because there is a nagging sense something is off about the character's whole vacation. That "something is off" feeling creates a horrific uneasiness throughout the movie."