How Stock Market Emotions work Against You

Finance Articles | March 18, 2009

In the stock market controlling your emotions is one of the most important keys to being successful as a trader or as an investor. There are so many ways your emotions can harm you. They can …

In the stock market controlling your emotions is one of the most important keys to being successful as a trader or as an investor. There are so many ways your emotions can harm you. They can …

1. Make You get out early

Your emotions can make you get out of a good trade too early to actually hurt your chances of making a good return from it. If you buy a stock at $50 and it goes up to $53 it is so tempting to get out of the trade and take the $3 profit, especially when you see the dollar amount associated with that.

But unless you were initially planning on getting out at $53 it can harm you and make you not realize your full profit from the trade. Getting scared and taking a profit too early can significantly decrease your overall return.

2. Make you hold on to losers

Another way your emotions can harm you is by making you hold on to losing trades. If you buy a stock and it falls down to your stop that’s it, you’re out. There is no reason for you to stay in the trade it can only make your losses grow much larger then they need to be.

Yet many people will still try to justify staying in because they will find some reason why the stock is a good long term investment, even when they initially entered it as a short term trade.

3. Make you enter too early

There is a lot of hype out there about different stocks and different for sure investments. But if the trade does not follow your rules there is no reason for you to be looking at it. Even if you find a stock you like it is much better to wait for it to actually give you a buy signal before jumping into it.

For information on how to control your emotions visit http://www.stocks-simplified.com/stock_market_emotions.html

For more information about the stock market visit http://www.stocks-simplified.com

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ABOUT THE AUTHOR

When I was young I wanted to learn how to trade the stock market. So I traveled around the country listening to professional traders talk about how they are making money in the market. Now I understand how easy it is to make money in the stock market and started a site http://www.stocks-simplified.com to help others learn.