The Driving Force In The Stock Market : Greed and Fear
Greed and fear are the major players in the stock market. These two emotions are the driving force behind almost all market participants - Institutional mangers, stockbrokers, investors, traders and yourself.
Perhaps you believe that you will not let fear and greed would never be in your way of trading, but I can assure you that they will be. It is not something that should cause shame. It is something you have to face it, recognize it and deal with it, if you plan to be a successful trader or investor
How do fear and greed look like in the stock market trading field?
You have been watching a particular stock for some time now. It has set up perfectly, so you pull the trigger. You bought it at the perfect price and now it is moving higher just as you thought it would.
Now your greed interferes and you believe that this stock price is shooting high. So you decide to buy more. another scenario is that your stock advances a few points beyond your exit price that you have planned for. Greed convinces you that that stock will continue to move in an uptrend tomorrow, so you hold on.
When securities move in an uptrend, greed from all who participate in the market adds to the uptrend.
Securities prices in most situations plummet quicker than go up and when this happen fear steps up.
Let us consider the example above, where you security advanced higher than the price you planned to sell for and you held on because greed controlled your emotions. The next morning the security price was lower than the previous day. Greed is convincing you that the stock price would rebound though it is now being dumped by traders. you continue to hold one while the price is in down spiral. Now fear is by your side, your profit has turned into a loss.
Everyone who trades will suffer through this until these two emotions: fear and greed, are under control. Once these two emotions are under control, you are on your way to successful trading. - 23310
Perhaps you believe that you will not let fear and greed would never be in your way of trading, but I can assure you that they will be. It is not something that should cause shame. It is something you have to face it, recognize it and deal with it, if you plan to be a successful trader or investor
How do fear and greed look like in the stock market trading field?
You have been watching a particular stock for some time now. It has set up perfectly, so you pull the trigger. You bought it at the perfect price and now it is moving higher just as you thought it would.
Now your greed interferes and you believe that this stock price is shooting high. So you decide to buy more. another scenario is that your stock advances a few points beyond your exit price that you have planned for. Greed convinces you that that stock will continue to move in an uptrend tomorrow, so you hold on.
When securities move in an uptrend, greed from all who participate in the market adds to the uptrend.
Securities prices in most situations plummet quicker than go up and when this happen fear steps up.
Let us consider the example above, where you security advanced higher than the price you planned to sell for and you held on because greed controlled your emotions. The next morning the security price was lower than the previous day. Greed is convincing you that the stock price would rebound though it is now being dumped by traders. you continue to hold one while the price is in down spiral. Now fear is by your side, your profit has turned into a loss.
Everyone who trades will suffer through this until these two emotions: fear and greed, are under control. Once these two emotions are under control, you are on your way to successful trading. - 23310
About the Author:
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posted by Mr. Forex at
7:39 AM
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