The Stock Market Investor?s Worst Enemy

Every stock market investor faces one primal enemy. An enemy so perverse, it will drive thousands of investors from the stock market through its ability to defeat even the most practiced investment strategy. Who is this enemy you ask? Your arch nemesis, in this case, goes by the name E. Motions?don't ask me what the "E" stands for.

Emotions are the driving force behind every stock market cycle. Quite simply, if they weren't present in the stock market, investors could be reaping rewards based solely on the expanding or receding economy, and professional traders wouldn't have any juicy profits from those emotional mistakes to grab.

Here is an example scenario:

Let's say that you've done your homework, read the books, traded on paper, and now you're making your fondest dream come true by investing in the market and making money!

You maturely approach losses as part of the learning curve. You've experienced your share of them but your wins are still in the lead, thanks to the commitment you made of not deviating from your chosen strategy. Euphoria sits on your shoulder.

One day, after 3 frustrating hours in traffic, you get home to find changes. You know that you should follow your strategy, but Stress and Greed are in charge. You're buying and selling outside your strategy, but are confident that it will be ok ? just this once.

Now prices are dropping and Fear enters the room.

Fear attacks every investor's self-confidence with a voracious need for control. You spend sleepless nights listening to his mantra - you don't know what you're doing.

Fear and Greed are now dictating the strategy. Self-confidence is on the critical list. Reason and Caution are under attack and are losing.

You ignore the primary investment rule of buying low, selling high because you've lost too much and have to recoup. You close your eyes and dive in to recover your losses. "It will work," says Greed on your right. "It has to work!" responds Fear on your left.

Your partner has now entered the fray and is hounding you about the lost money. Your capital is almost gone. You erred grievously and invested money that you need now. Margin calls are being made. You're out of control.

While the components of the above scenario will change, the catalyst of this nightmare remains the same ? emotions. You'll survive the nightmare, but the experience will forever change you. Fear will shade every future stock market decision and severely limit your ability to objectively evaluate any investment opportunity out of fear that you'll lose again. But, it doesn't have to be that way.

Developing a strategy to deal with emotions can give you a winning edge.

Here's how:

• Don't go into the stock market to feel good about yourself.

• Always look outside of the stock market for self-gratification and affirmation.

• Make a commitment to stick to your chosen action plan or strategy. Don't deviate.

• When a loss occurs, examine it and learn from it. Don't try to get even.

• Think before you leap into anything

• If you are stressed out, vulnerable, or overly emotional (high or low), do not trade. It's not worth the financial risk.

Remember, the key isn't denying or curbing your emotions, but instead understanding how they impact your investment decisions and developing a strategy to work with them.

About The Author

Jeff Fairchild is the publisher of http://www.best-stock-trading-systems.com The site includes tips, techniques, strategies, and systems designed around improving your stock trading profits. Investors and traders! Are you overwhelmed by all of the online stock information on the net? One of these pages may be of help:

http://www.best-stock-trading-systems.com/internet_stock_investing.html

http://www.best-stock-trading-systems.com/trading_stocks_online.html

---

Look Out The Window

Quick, look out the window. It's raining. No, the sun's... Read More

Acapulco - The Stock Market Dives

There is a famous cliff on the ocean in Acapulco... Read More

Why Buy and Hold?

Since I can remember, and that's a long time ago,... Read More

Robert Rodriguez Weathers the Stock Market

Robert Rodriguez likes to buy stocks at their lows. When... Read More

DIY Portfolio Management

Exchange Traded Funds (ETFs) are growing. Investors are choosing low... Read More

Using Sector Funds to Construct Diversified Mutual Fund Portfolios

'Sector funds are too risky.' 'I doubled my money with... Read More

Cash

How many people went to a cash position this week?... Read More

3 Components Needed for Beating the Market

Time to look back2004 is over, now we are in... Read More

Is The Bear In The Cage?

For the last few weeks we have seen the stock... Read More

Stock Market Education; Day Trading for Beginnners; How to Pick Stocks

The trading method you employ to approach the stock market... Read More

Advisory News Letters

Several times each month I am solicited by various market... Read More

Patterns

The Law of Chaos is the theory of random unpredictable... Read More

Choosing a Stock Broker

If you were to find that you had some severe... Read More

?Fears Only Enemy Is Action?

What a great statement!I just heard someone use it in... Read More

Kick The Tires

Before you buy another car you walk around the lot,... Read More

Emotional Maturity

If you are going to be a winner in the... Read More

The Information Age

It is wonderful to be alive in the information age.... Read More

Stock Loans

Hedge current portfolio positions and gain access to capital resources... Read More

Finding A Good Stock

One of the things people are always asking me is... Read More

One Way Street

Ever turn down a street, get half way and suddenly... Read More

Stops Make Money

During the day I watch CNBC-TV, the stock market channel.... Read More

Bad News is Good News

For weeks, no, months we have been bombarded with nothing... Read More

How To Buy And Hold

One of the most believed bits of conventional wisdom from... Read More

Good Stock Market Tip; Good Return!

Forget making a profit; instead focus on the income provided... Read More

Some Good News for A Change

Before we get into all the good news out there,... Read More

Two for the Money

Look back over the years and try to remember how... Read More

Trading vs Investing

I often hear from people, "I don't trade. I invest.... Read More

Trading Systems

To become a successful trader you must have some kind... Read More

How to Evaluate Load vs. No Load Mutual Funds

If you have been dealing with mutual funds for any... Read More

Gurgle Gurgle

Caught in a whirlpool and being sucked under. No life... Read More

How We Eluded The Bear Of 2000

The date October 13, 2000 will forever be embedded in... Read More

Does Japan Matter?

For the last 12 years we have seen the Japanese... Read More

The Cub; II

We keep hearing about this bear market and that the... Read More