Methods To Maximize Your Gains From Your Stock Market Through Overcoming Inhibiting Emotions PDF Print E-mail
Written by Bernard J Dreyfus   
Thursday, 16 September 2010 16:31
This question has always been asked by many, in particular beginners in the stock market: Why is human being psychology significant within the stock market? Isn't developing rewarding money making approaches satisfactory for one to earn a huge hoard of money?
by BernardJDreyfus


This subject has always been asked by many, particularly beginners within the stock market: Why is human psychology significant within the stock market? Isn't having valuable money making tactics ample for one to earn a sizable hoard of cash?

Throughout the ages, the human psychology "wired" in most of us has been constantly refined to meet the ever-changing demands of the hostile environment. The truth is, the essential human instincts for survival and propagation of the following generation stems from it.

The million dollar problem : how can human psychology affect how we behave and feel as investors or traders? Does it hinder us from our money making efforts or worse still, cause us to lose a whole lot of wealth as compared with to create more?

After years of research, specialists have verified one central fact, and that's this: Humans aren't "wired" to generate profits while in the stock market as some principles of making money inside the markets clashed with our key human programming. Hence, about 90% of investors or traders are more likely to lose money in shares. This leads us to the next million dollar problem: Why are the rest of 10% of investors or traders triumphant?

It's a well known proven fact that so as to be highly successful in any field, there are three critical parts: planning and strategising, achievement with effort and finally, thinking and enhancement.

Making a living while in the stock markets in not dissimilar. In truth, this is exactly the key of the successful 10% who earn money consistently in the stock markets.

Why do they do so well? What makes them so special that they can make it where other people not make the grade?

What they have got is often a thorough buy and sell approach when coping with the stock market, including rules and guidelines to keep their emotions at bay during the course.

The two main emotions that successful investors and traders need to beat is fear and greed. These two emotions often affect investors and traders to act absurdly and lose their common sense during the sensitive state. This is certainly evidently manifested during the extreme highs and lows during the stock market cycles. A fantastic case in point of greed would be the 1999 - 2001 dot com period when the Nasdaq rose to an incredible 5000 points (it has, up till at this time never been able to scale that height once more) and an case of fear will be the 2007-2009 collapse of the stock market when home prices collapsed and subprime problems took out Lehman Brothers. Investors and traders were simply fleeing toward the exits.

In brief, in order to be a good investors or traders one must conquer his or her feelings (namely fear and greed) through a well developed routine for purchasing and selling stocks. Whenever a slip-up based on emotions is made, the investor or trader should contemplate on it to ensure a valuable lesson is internalized and modify his/her system to make sure it will never be made once more.

DISCLAIMER: This article is provided as information only and is not to be taken as financial advice.

Bernard J Dreyfus is a veteran investor and likes coaching beginners through his blog on stock market for novices. If you want to know more on the current market scenario and how to invest in stocks, do check his blog out.