Stock Market: The Land of Greed and Fear

By Leyla Maker

The major players in the stock market emotions are greed and fear. They are the forces that drives all market participants - Stockbrokers, institutional managers, traders, investors and yourself.

Perhaps you believe that you will not let fear and greed would never be in your way of trading, but I can assure you that they will be. It is not something that should cause shame. It is something you have to face it, recognize it and deal with it, if you plan to be a successful 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 pops up to the scene and convince you that this security is heading up like a rocket. So you are motivated to buy more of the stock, another possibility is that your stock is advancing higher and reaches beyond the selling price that you have planned to sell for. Now greed makes you believe that the stock will continue in an uptrend till the next day and so you hold on to it.

When stocks make strong moves to the upside greed from all the cumulative market participants joins the move.

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

Let us analyze the example above, where your stock moved beyond your exit price and you held on because you were on the side of greed. The next morning the stock price went down. The stock is being under heavy selling pressure, but you would not sell because greed is convincing you that higher prices would come back. While you are holding on, the price keep going down and now fear is popping up, but it is too late, now you have looses not profits.

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. - 32163

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