Trading Psychology

Investor Behavior

Lots and lots of money can be made in the markets, but only if a person learn to control his inner emotions.

The stock market is mainly driven by just two emotions ie., Greed and Hope (known as Deadly Enemies in Stock Trading). After all, most of us have a desire to acquire as much wealth as possible in a shortest time.  This get-rich-quick mentality makes it hard to maintain gains and keep to a strict investment plan over the long term.

Greed is usually described as an irresistible craving to possess more of something (money, material) than one actually needs. Greed changes our way of thinking and just like we hold on until the market reserves on us.

When we take a position in the market, whether bullish or bearish, we Hope it will be successful. Hope can be such a powerful emotion, that when the same trading plan that told us to enter a position originally, reverses and tells us to exit immediately, our emotions may very well focus on the possibility that if we just hold on a bit longer, any loss may be erased.

We should make a decision based on the fundamentals and technical analysis and not based on greed and hope. Then only we can win the stock market with good system of trading.

Aiyan Thiruvalluvar says

ஆக்கம் கருதி முதலிழக்கும் செய்வினை 

ஊக்கார் அறிவுடை யார். (463)

कितना भावी लाभ हो, इसपर दे कर ध्यान ।
पूँजी-नाशक कर्म तो, करते नहिं मतिमान ॥ (४६३)

Explanation by Scholars: 

The Wise men will not, in the hopes of huge profit, undertake business that will consume their principal.

பெரும் ஆதாயம் (செல்வம்) கிட்டுமென்று எதிர்பார்த்துக் கை முதலையும் இழந்து விடக்கூடிய காரியத்தை அறிவுடையவர்கள் செய்ய மாட்டார்கள்.

ஆக்கம்கருதி = anticipating huge profit due to greed and hope 

முதலிழக்கும் = losing the principal 

செய்வினை = involving in an act 

ஊக்கார் = Won’t do 

அறிவுடையார் = Wise men