Trading Psychology – Fear and Greed in the Stock exchange
(And Some Things You Might Not Have Believed About)
Everyone that trades absolutely must examine their trading psychology often. Many of us have learned about the effects of fear and greed we face when we company the markets. And, more than likely, you have thought to yourself “I’m not fearful” and “I’m not greedy”. The truth of the matter is “YES, you are”. We all each experience different levels of fear and avarice in a trade. When ever we say ‘fear’, we are not talking about you crouching in a fetal position in the corner trembling and unsteadiness back and forth. Then when we say ‘greed’ were not talking about you wrenching your hands, salivating at your mouth like you would imagine Mister. Scrooge. Fear and hpye are incredibly subtle in a trade and can alternative from the other person within secs
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When the market immediately moves against our trade, you may notice an immediate rise in your anxiety. Seasoned traders are being used to this because it is very seldom that a trader will strike the exact bottom or top of any transact to make an entrance. They expect a move against them for a short amount of time. However when is it time to exit the trade, if it proceeds its move against you?
It’s that feeling you get when someone advances out and startles you. It certainly is not that feeling like almost getting hit by a car. Nor is it the feeling you have when watching a terrifying movie.
Most of the time, fear in the market is a more subtle experience. You will have difficult time recognizing it as fear simply because your mind will be trapped up in the instant. You’re going to be very busy attempting to call and make an important decision and discerning the future regretful distastefulness you will experience if the incorrect decision is made.
After a decision is made and you are finished rejoicing your latest victory or grieving the failure of your decision, step back and give yourself an genuine, non-condescending, non-self-pitying analysis. You will find that dread had created the formula of a final decision.
Constantly be aware of this emotion. Never let it decide your fate. The only way to get over it is to plan and stick to that plan. Plan your admittance, your exit, your target(s). Make sure to have alternative plans in circumstance of different scenarios that could possibly enter into play with your trade.
In reading about fear and greed in the market, I have pointed out that something was missing in those writings. Patience will certainly not be mentioned. Endurance has the ability to magnify fear and avarice.
Since we are communicating about fear, let’s look at how patience affects fear within the investment. Scenario:
Your trade is moving against you. You are losing money. You feel that empty tum feeling and slight anxiety. If you supply the circumstances too much patience, you could be in for deeper losses. If you have too little endurance, you might exit the transact prematurely and miss away on much welcomed benefits.
So what do you do? At this point in the game, it is a toss up. Don’t beat yourself up too badly if you make the wrong decision but ensure you learn from this experience. The lessons to learn is to plan BEFORE you click that button that gets you in to the trade in the first place. A large number of seasoned traders fall into the trap of faltering to plan appropriately too. They get cocky but the market will let them know soon enough of their failings.