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 are saying that you will never let fear and greed interfere with your trading, but be assured that they will be. It is not something that you should feel ashamed of. It is one thing you have to realize, come face to face, if you are determined to be a successful stock trader or investor

How do greed and fear look in the stock market trading stage?

You have been following a certain stock for a period of time now. It is advancing in price, so you decide to buy. You bought at a low price and now it is to higher price as you expected 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 look at the example above, where your stock went through your get out price and you held on because greed was by your side. The next morning the stock price gaps down. There is heavy selling all morning long. Greed is telling you to hang in there the price will come back. The price keeps going down, now you get a knot in your gut, and your knuckles are turning white. Fear is now by your side, but by now it is too late, your nice profit has turned into a loss.

Everyone goes through this until they have mastered the ugly faces of greed and fear. Master this and you are well on your way to becoming a successful stock trader. - 31970

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