Emotional Investing
Nothing could possibly be rational about trying to trade exactly the k or market time after time even if it continues to generate losses. In truth, it is dog dumb. This is exactly what many investors do. All they know is a single market, gold mining stocks as an example, although they’ve already lost money trading within this market, or have missed out on gains in other sectors. They just continue to put money into the same stock or market while the losing trades stack up. Now chill out you gold bugs who troll my video clips. This occurs not just with gold or gold mining stocks, but can occur in almost any stock, sector, industry, or market.
Emotion-Free Investing
Most people prefer to assign human feelings to non-human items. In truth, it is a very human activity. We’ve invented a word for the exercise of assigning human emotions to everything: anthropomorphism. You will listen to traders declare such things as she is my favorite stock, or I adore this little one. Once human emotions have been allotted to a stock, harmful attachment to the stock or market arises, and traders will lose money over and over again. Do not ever designate human characteristics or feelings to stock and grow too emotionally involved with them.
Release Losing Trades
Let your losers go as quickly as you can and move forward. There’s a viral video available that shows a dog in Japan still protecting his home even though the house is gone and just the concrete basic foundation remains. This is an analogy for the way attempting to make money in the same stock repeatedly causes you to look dumb and will truly damage your trading account. Do you think you’re a foolish dog trader? This is how several amateur investors are. I have seen investors hang on to a stock that’s gone totally worthless and has turned into an empty shell they don’t let go of their dream that this stock, their baby, would change them into a millionaire. Even experienced traders can fall into this snare simply by scrutinizing a company’s press releases. Don’t forget, that press releases aren’t news. They’re a marketing tool for an organization. Even expert investors often overlook this and become psychologically attached to a story stock.
Avoid Emotional Bias in Trading
However, it is not only fundamental analysis that could get a trader to fall in love with a stock. Technical analysts may also get caught in this trap by getting attached to their favorite chart pattern which they love. As the trade runs against them, they hold on to long mainly because they have formed an attachment to the pattern on the stock. Developing emotional attachments to things is part of being human. Continually ask yourself if you’re building an unhealthy emotional attachment to a stock or market. Constantly make sure to keep your emotions under control when investing. Consider Spock on Star Trek. Now this is a fictional temperament that would make for an ideal stock trader.
