Skip to main content

Emotional Trading

Image
By
Emotional Trading

Most people crave excitement and entertainment. Singers, actors, and professional athletes command much higher incomes than such mundane workmen as physicians, pilots, or college professors. People love to have their nerves tickled—they buy lot- tery tickets, fly to LasVegas, and slow down to gawk at road accidents.
Emotional trading can be very addictive. Even those who drop money in the mar- kets receive a fantastic entertainment value.
The market is a spectator sport and a participant sport rolled into one. Imagine going to a major-league ball game in which you are not confined to the bleachers. Pay a few hundred dollars and be allowed to run onto the field and join the game. If you hit the ball right, you’ll get paid like a professional.
You would probably think twice before running onto the field the first few times. This cautious attitude is responsible for the well-known “beginner’s luck.” Once a beginner hits the ball right a few times and collects his pay, he is likely to get the idea that he is as good as the pros or even better and could make a good living from the game. Greedy amateurs start running onto the field too often, even when there are no good playing opportunities. Before they know what hit them, a short string of losses destroys their accounts.
The market is among the most entertaining places on the face of the Earth, but emotional decisions are lethal. If you ever go to a racetrack, turn around, and watch the humans instead of horses. Gamblers stomp their feet, jump up and down, and yell at horses and jockeys.Thousands of people act out their emotions.Winners em- brace, and losers tear up their tickets in disgust.The joy, the pain, and the intensity of wishful thinking are caricatures of what happens in the markets. A cool handicapper.


Comments

Post a Comment

Popular posts from this blog

Commissions

By
Commissions: Commissions have become much smaller in the past two decades.Twenty years ago, there were still brokers who charged one-way commissions of between half a percent and one percent of trade value. Buying a thousand shares of GE at $20 a share, with a total value of $20,000, would have set you back $100 to $200 on the way in—and again on the way out. Fortunately for traders, commission rates have plummeted. The extortionate rates haven’t completely disappeared. While preparing this book for publication, I received an e-mail from a client in Greece with a small ac- count whose broker—a major European bank—charged him a $40 minimum on any trade. I told him of my broker whose minimum for a hundred shares is only $1. Without proper care, even seemingly small numbers can raise a tall barrier to success. Look at a fairly active trader with a $20,000 account, doing one roundtrip trade per day, four days a week. Paying $10 one way, by the end of the week he’ll spend $80 in commi...
18 comments
Read more

SIPs - A habit to inculcate

By
The one conscious habit that everyone needs to adopt is the habit of SIPs. Saving something every month and investing it systematically in mutual funds is a habit that most of us should inculcate. It's not that hard and the long-term benefits are fabulous. Cultivating the SIP habit frees you from having to decide when and how much to invest. SIPs are in this sense the best way to invest in equity funds. Systematic investments average out the cost of your unit purchases, they don't put you at the risk of catching a market peak, and they earn you the benefit of compounding. And probably the most important benefit, from a non-technical perspective, is that SIPs force you to save and invest that definite amount periodically. Money saved is money earned, we know that. And in the case of SIPs, money invested is money that works to earn more money for you. Now, isn't that a habit you could get used to?
13 comments
Read more
By
Building Your Go to Market Strategy When you introduce a product or service to a new market, there’s always going to be some risk. Over 30,000 new products are introduced every year, but 95% of new products fail. You don’t want to spend time and resources on a go to market plan that’s going to fall flat. A comprehensive go to market strategy acts as a roadmap, helping you research your market, position your brand, and unveil your new product or service. But before we look at how to build a go to market strategy framework, just what is “go to market” and how do you build a strategy around it? What Is a Go to Market Strategy? So, what does “go to market” mean? A go to market strategy (sometimes called a GTM strategy) is a plan of action that lays out how your company will reach customers in a new target market and gain a competitive advantage over other players in that market. It can also refer to how you’ll reach customers in an existing market with a new produ...
1 comment
Read more