2022-12-09 15:29:17
Three emotions that get in the way of trading: greed, fear and hope
Man is an emotional creature and this is his nature. In trading, there is practically no place for emotions, especially such as fear and hope. Unfortunately, traders often make decisions driven by fear or with illusory hopes. These emotions consume the trader and influence the decision to buy or sell the stock.
The fear of a fall in prices provokes a sale, and the possibility of losing a chance to make money feeds the trader's hope and gives an impetus to an unjustified purchase. Another harmful emotion, like greed, is a manifestation of a trader's arrogance and his desire to get a good income as soon as possible, which also provokes the unreasonableness of transactions.
Many psychologists and scientists are doing a lot of research in the field of studying human emotions and feelings, the results of which show the ability to control their emotions. In trading, emotion management is a very necessary art. Let's take a closer look at three seemingly difficult emotions on which a trader's work in the market depends:
- Fear
- Hope
- Greed
It is believed that these emotions do not fully drive financial markets. And this opinion has the right to be, since in the market we also observe successful traders who, apparently, are not influenced by destructive emotions.
The role of fear in stock trading.
In fact, fear plays an important role in the market. Fear often deprives the trader of the opportunity to make money, keeping him from making fatal decisions. The emotion of fear often serves as a kind of "brake" for a trader. The frightened trader becomes very obsessed with the unfavorable aspects of trading. The fear of losing money generates questions in the trader's head:
- How far will the price go against me, if suddenly what?
- What if the situation gets worse?
- What if I start to lose?
Hope is the last to die.
Of all three emotions, most market participants live on hope. This emotion is completely opposite to fear, because its presence influences positive thinking about aspects of trading. In moments of hope, the thinking of market participants is directed towards the goal of making a profit, and not losing it:
- How much can I earn on this deal?
- Maybe the price will go up and I'll hit the jackpot?
Greed will destroy the trader.
Greed is a harmful and dangerous feeling, especially for a trader. The predominance of greed rarely can contribute to obtaining the desired result, depriving people of the opportunity to think soberly and objectively. Often, having felt success, a trader wants to earn more and more by making the following mistakes:
- Untimely exit from the deal
- "Sitting" in position
- Overestimation of risks
People trade in order to achieve success and financial stability by taking income from the market. The circle of such people was divided into optimists and pessimists, absorbed in hope, fear and greed, only to varying degrees. One way or another, an overabundance of these emotions can lead to losses and losses. The best option is to find a “middle ground” and learn how to manage your emotions. Always remember that emotions tend to control you and influence your trading decisions.
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