Stock Market: The Land of Greed and Fear

The stock market emotions are being played by two major players: Greed and fear. They are the forces driving all market participants - Institutional managers, stock brokers, investors, traders and yourself.

You might be saying to yourself that greed and fear will never get in the way of my trading, but believe it or not they will be. It is not something to be ashamed of. It is something you have to admit to, come face to face with, if you are to become a successful stock trader or investor.

How do greed and fear look in the stock market trading stage?

You have been watching a particular stock for some time now. It has set up perfectly, so you pull the trigger. You bought it at the perfect price and now it is moving higher just as you thought it would.

Now your greed interferes and you believe that this stock price is shooting high. So you decide to buy more. another scenario is that your stock advances a few points beyond your exit price that you have planned for. Greed convinces you that that stock will continue to move in an uptrend tomorrow, so you hold on.

When securities move in an uptrend, greed from all who participate in the market adds to the uptrend.

Stock prices in most situations drop faster than moving up and when this takes place, fear shows up.

Let us consider the example above, where you security advanced higher than the price you planned to sell for and you held on because greed controlled your emotions. The next morning the security price was lower than the previous day. Greed is convincing you that the stock price would rebound though it is now being dumped by traders. you continue to hold one while the price is in down spiral. Now fear is by your side, your profit has turned into a loss.

Everyone who trades will suffer through this until these two emotions: fear and greed, are under control. Once these two emotions are under control, you are on your way to successful trading.

About the Author:

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