Emotional Trading

The single most expensive stock market trades are those made with emotions, but, of course, you are not an emotional trader are you?

Before you bought that stock, mutual fund or Exchange Traded Fund (ETF) you did your research to be sure that what you were buying would return a good profit over the long haul. You bought it and over time you look at it less and less.

Ask yourself: when you plunked down your hard earned money did you have any idea where you would sell it or where you might exit the trade should the stock go down instead of up? And suppose it has gone up have you made any plans to protect those profits?

There were many geniuses in 1999 who bought a tech stock at $20 and saw it run to $200 only to come back down to $2. Those who had an exit strategy probably sold out as it turned over and dropped like a rock. They kept most of their profits as well as their original investment.

What kept those BuyNholders in? It was emotion. They fell in love with the stock because they "knew" it was worth more and would "come back up".

Investing is not an "I hope, I hope" business, but it is a business. Never become emotionally attached to anything you buy. If you were in the buggy whip business in 1900 and saw the automobile putting the horse out to pasture you easily knew it was time to sell out. That also applies to any investment you make in the stock market.

Once each month you should be checking to see if your various stocks are advancing as planned. Forget all those pretty research reports your broker sent you. Burn them. Now you must not care anything about that company. What you care about now is your money. As long as the stock price is advancing you may continue your love affair, but when it starts down it is time for a divorce. Time to leave before the damage gets worse.

This is where emotion becomes expensive. If you just bought it your ties are strong and you know if you sell you will have a loss. Never fall for that old broker's adage that you don't have a loss until you sell. Anyone who believes that will be eating cat food at retirement.

When you bought that new car you knew as soon as you drove it off the lot it would be worth 20% less than you paid for it. Twenty percent is a lot and more than most folks should be willing to risk when investing. Forget "the long haul" as you don't want to take the 40% losses that many investors did in 2000.

Usually a good rule of thumb is 10%. When you drive that stock off the exchange floor your risk should be limited. You decide how much you are willing to lose if it goes down instead of up and as it goes up carry that risk percentage along to lock in your profit.

If you do sell never look back. Fagedaboudit! In 80% of those sales when you do look back six months later you will see you are way ahead in the money game.

Do not allow an emotional attachment to keep you in any stock or fund. It will drain you both mentally and financially.

Al Thomas' book, "If It Doesn't Go Up, Don't Buy It!" has helped thousands of people make money and keep their profits with his simple 2-step method. Read the first chapter at http://www.mutualfundmagic.com and discover why he's the man that Wall Street does not want you to know.

Copyright 2005

al@mutualfundstrategy.com; 1-888-345-7870

---

Good News?

As the man said, "I've got some good news and... Read More

Mutual Fund Commissions

You have heard about a particular mutual fund from a... 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

Analysts - Do They Really Know The Stock Market?

When you become interested in a stock or mutual fund... Read More

Discover the Retirement Breakthrough the Federal Government Created for You - The Roth IRA!

If you don't know what a Roth IRA is then... Read More

Do You Know What is the Single MOST Critical Mistake in Trading the Stock Market??

Well maybe that's overstating it a little, but it's certainly... Read More

Smart Day Trading Strategies to Help You Make Money in the Stock Market

Stock trading can be a very profitable activity. You can... Read More

You Wont Like This

Why? Because I am going to shatter your conventional wisdom... Read More

Inertia Syndrome

When it comes to buying a stock or mutual fund... Read More

Bollinger Bands Strategies

The Bollinger Band theory is designed to depict the volatility... Read More

Your Job

There are so many kinds of work that needs to... Read More

War Market

There is no question that the stock market is being... Read More

Time Out

Are you paying any attention to your retirement savings? Do... Read More

It Cant Be Done

Wouldn't it be nice if you were only in the... Read More

Whos Calling?

Its dinnertime and the phone rings. It's Joe Noname with... Read More

Humpty Dumpty the Stock Market Falls Down

Humpty Dumpty had a great fall and all the King's... Read More

Different Ways of Buying Stocks

Let's say you are interested in this one company. You... Read More

Small-Cap Stocks: The Beginning of the Journey

When an individual investor wants to roll up his sleeves... Read More

Successful Trading ? Taking Profits - Part 1

So you're started trading, you bought some positions with your... Read More

Overseas Investing: Going Against the Mainstream

TOO OFTEN, INVESTORS SIMPLY CHOOSE TO follow the crowd. This... Read More

Shorting Stocks ? The Basics, Part I of II

What does it mean to short a stock?This means that... Read More

Why Technical Indicators

The fight continues to rage among traders who use technical... Read More

Series 7 Exam

What is the Series 7 Exam? If you... Read More

Its Snowing

The Winter Games for the Olympics are coming up soon... Read More

How to Maximize Your 401k Mutual Fund Returns

When it comes to 401k's there is an overabundance of... Read More

Dont Buy Worldcom! A Guide to Wise Bottom Fishing

Over the past few months, several investment professionals have brought... Read More

Swing Trading Strategies

Using Swing Trading Strategies and Technical Analysis when Trading Stocks... Read More

Option Spread Trading

Spread trading is a technique that can be used to... Read More

Mousetrap

The spring-loaded rat catcher is the ultimate low-tech device invented... Read More

Again With the Bubbles?

A few years back ? it seems like an eternity... Read More

How To Pick A Mutual Fund

Mutual funds by definition are a mixed bag of stocks,... Read More

Social Insecurity

Just about everything you have been told about Social Security... Read More

Dividends

When is a dividend not a dividend?The latest thing "conservative"... Read More