The stock market is mostly driven by greed and fear. These are the two kinds of
Institutional managers, stockbrokers, and most other people who work in the market are all driven by this.
Those who invest, those who trade, and you.
You might be telling yourself, "Greed and fear won't stop me from trading."
but you better believe they will be. It's nothing to be embarrassed about. It's something that
if you want to be a successful stock trader or investor, you will have to admit to, face,
investor.
How do greed and fear show up in trading on the stock market?
You have been keeping an eye on a certain stock for a while now. You pull the trigger because everything is set up perfectly. You bought it at the right price, and now it's going up just like you thought it would.
Now, your greed steps up and says, "This is going to be a rocket ship." So you buy some more shares. Or your stock goes up or down a few points and goes above or below the price you wanted to sell at. You hang on because greed tells you that this baby will go up tomorrow.
When stocks move sharply up, everyone in the market follows because they want to make money.
Most of the time, stock prices go down faster than they go up. When this happens, fear takes over.
Let's look at the above example, where your stock went past your "get out" price, but you didn't sell because you were too greedy. The stock price gapped down the next morning. All morning long, there are a lot of sales. Greed tells you to keep going because the price will come back. The price keeps going down, and now you have a knot in your stomach and white knuckles. Fear is now on your side, but it's too late; you've already lost your nice profit.
This is something that everyone has to go through until they learn how to control greed and fear. If you can get good at this, you will be well on your way to becoming a successful stock trader.
