Fear and greed in the market

Greed and fear.

Two Emotions that play a bigger factor in people’s success or failure than any other emotion we experience. Both fear and greed refer to an inner emotional state. Tens of millions of dollars have been made and lost based on these 2 emotions alone. In trade, business and relationships. So why do so many educational courses, stock trading books, and online courses avoid this topic all together?

Perhaps they don’t shy away from the subject of emotions, perhaps by teaching their readers certain techniques and skills, they actually deal with the emotional side of trading.

Emotions are known to cause some pleasure or displeasure. Emotions are also known to be networked with mood, mind structure, desires and passions. The list goes on… So how do we as individuals develop the skills to navigate these emotions in business, trading and life?

Charles Darwin argued that emotions actually serve a purpose in humans, and rightly so if our emotions have been evolving for over 2 million years. Shouldn’t we be using these amazing skills to our advantage instead of blaming them for making bad decisions? I believe that making bad decisions has nothing to do with emotion and everything to do with laziness and lack of planning.

A lesson from one of the greats.

I would be doing my readers a disservice if I didn’t mention Warren Buffett’s strategy. One of the most successful investors of our time. Warren Buffett stuck to his strategy and profited greatly. Warren Buffett showed us how important and profitable it is to stick to a plan. When deciding whether to invest in a company, Buffett and his colleagues follow a few simple guidelines, one of which includes determining the longevity of the company.

As the market fills with greed, the same can happen with fear. When a stock suffers large losses for an extended period of time, the overall market may become more fearful of even further losses. But being too afraid can be a serious mistake. This is when successful investors and traders make their move. This is where the real money is made.

Just as greed dominated the recent Cryptocurrency boom or fear dominated the headlines of a potential trade war outcome, investors are quickly jumping from one “safe” investment to another. It becomes a constant game of cat and mouse.

This flood of money into the stock market shows a complete disregard for the many technical indicators that continue to scream that a correction is imminent. Retail investors seem overjoyed by the flood of headlines that read ALL TIME HIGH. Should retail investors be cowed by fear of a major correction? It’s true that losing a large portion of the value of your retirement portfolio is a tough pill to swallow, but it’s even harder to digest the huge gains the market is currently offering investors of all experience levels.

Having a clear understanding of my personal goals, understanding my success, and making a list of my OWN wants and needs, rather than seeing other people’s dreams and trying to achieve them, has been a huge factor in quenching the flames of my own greed. trading and day-to-day decision making.

I’ve also added a link to “Must Read” books that have been helpful in my decision-making journey of mastering my emotions. I will update this as I see fit..

One method I have found to be helpful is to be mindful of how I measure success, wealth, goals, and most importantly, happiness. It’s so easy these days to let outside influences affect our happiness and success. Social media bombards us daily with the success of others.