When we let emotions take over we can sometimes make bad decisions. Emotions are our primal side poking through which can lead to some drastic mistakes in many areas of our lives. Being ruled by emotions can impact work, relationships, and even investing. Since people are very sensitive about money, investing and trading are the two areas where emotions need to be controlled the most.
Traders that can put their emotions aside and let their rational half of the brain make decisions will see better results. It takes a clinical approach to be able to make big decisions so you aren’t prone to taking actions that are counterproductive. In this article, we will go over what it means to control your emotions when trading with someone like Credit Financier Invest, for instance.
Fear is easily the strongest emotion that hurts us when doing investing or trading. It is extremely difficult to look at a situation for what it is when there is a fear of losing money. It is what holds people back from getting through the troughs that inevitably come with trading.
This fear generally leads to the losses that people worry about the most. For instance, in 2008, there was a big sell-off as stock prices plunged. Those that sold lost money because even when there is a market crash, you can only lose money when you sell. Those that used rational thinking understood that things would bottom out and then climb back up.
It’s only a matter of time for the market to correct and then climb. Those that sold lost out on the biggest bull run in history where they could have seen gains of up to 500%. Fear also kept a lot of people from buying stocks because they were afraid that the market would continue to plummet.
When you see the herd going in a certain direction, it is understandable that you may think that they know what they are doing. After all, that many people couldn’t all be wrong. Well, that is a form of using emotion to make a decision.
Having a system or strategy based on a number of educated decisions should be stuck with. If you abandon your strategy to one where you didn’t do enough research simply because that is what everybody else is doing is faulty thinking. Following the herd is an emotional response that can, and should, be suppressed.
Impatience is another emotion that hurts a lot of investors. It could show itself in the form of selling stocks that you expected to be performing better or buying when there is still room for the stock to fall.
You should have a set of criteria for buying and selling that need to be met before you make a decision. This prevents impatience from taking over and deviating from what you need to do. Overreacting causes a lot of missed opportunities that a savvy investor is able to see because they were simply being patient.
Disclaimer: MoneyMagpie is not a licensed financial advisor and therefore information found here including opinions, commentary, suggestions or strategies are for informational, entertainment or educational purposes only. This should not be considered as financial advice. Anyone thinking of investing should conduct their own due diligence.