Greed and Fear
Greed and Fear
When you are trading in the stock market, greed and fear are the two indispensable factors that you would be subject to and it greatly becomes the deciding factor behind all your investment decisions. These two emotions are common among all the investors: be it institutional investors, individual traders or long term investors.
If you are new in to trading in the stock markets, you would have decided that you will never let greed and fear influence your decisions. But, it is impossible to overcome these emotions easily and if you wish to be successful at your trading stint in the stock market, you would have to work hard on overcoming these emotions.
Read on to have a clear understanding about how greed and fear influences any investor or trader in the stock market.
Consider the instance where you have been watching a particular stock that you have had for a long time and the prices go up, as you had projected. It has reached your expected price and it is about time that you make a call to sell the stock. But at this moment, you feel that it would further surge and you can make more money from the stock and instead of pulling the trigger, you purchase more shares or even hold the already existing shares without selling by being under the impression that the price would further increase.
But the most golden rule of stock market is that it picks up at a gradual pace and falls rapidly. This can mainly be attributed to the fact that many people go on a buying spree when the stock prices start to rise and suddenly, everyone decides to quit when the price touches new peaks.
With the sudden fall, you have a fear in your mind on what should be done with the stock. You abstain yourself from selling as you hadn’t sold it even when the stock price was high, all thanks to the greed that crept in. You still hold the stock and suddenly, as the market becomes bearish and there is a heavy selling of that stock.
You wait for a while with the assumption that the stock prices would go up, but it continues to fall below the price at which you wanted it to sell initially. Greed minimized your profit and if you still do not make a call, the stock price would further fall and it would result in a loss.
At an instance where you could have made a decent profit, you end up in loss. This happens with everyone and once you overcome these emotions that you previously had let affect your decisions, you would become a successful stock trader.