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 are related to the inner emotional state. Tens of millions of dollars have been earned and lost on the basis of these 2 emotions alone. In trade, in business and in relationships. So why are so many educational courses, stock books and online courses avoiding this topic together?
Perhaps they do not avoid the topic of emotions. Perhaps by teaching their readers certain techniques and skills, they are actually dealing with the emotional side of trading!
It is well known that emotions create a certain amount of pleasure or displeasure. It is also known that emotions are related to mood, mood, desires and passion. The list goes on … So how do we as individuals develop the skill set to navigate these emotions in business, commerce and life?
Charles Darwin argued that emotions actually serve purposes for people, and this is true when our emotions have evolved over 2 million years. Shouldn’t we use these amazing skills to our advantage rather than blaming them for making bad decisions? I believe that bad decision-making has nothing to do with emotions, and is all about laziness and lack of planning.
A lesson from one of the great ones!
I would have done my readers a disservice if we hadn’t mentioned Warren Buffett’s strategy. One of the most successful investors of our time. Warren Buffett followed his strategy and made big profits. Warren Buffett showed us how important and useful it is to follow a plan. When deciding whether to invest in a company or not, Buffett and his partners follow a few simple guidelines, one of which involves trying to determine the longevity of the company.
If the market is full of greed, the same thing can happen with fear. If stocks suffer large losses over a long period of time, the overall market may become more afraid of sustaining even further losses. But being too scared can be a serious mistake. It is at this time that successful investors and traders make their move. Real money is earned here.
Just as greed dominated the recent cryptocurrency boom or fear dominated the headlines about the potential outcomes of a trade war, investors are rapidly moving from one “safe” investment to another. It becomes a constant game of cat and mouse.
This flow of money into the stock market shows a complete disregard for many technical indicators that keep shouting that a correction is inevitable. Retail investors seem to be thrilled with the headlines that sound for ALL HIGH TIME. Should retail investors be overwhelmed by the fear of a major correction ?. Sure, losing a significant portion of your retirement portfolio is a heavy pill that is hard to swallow, but even harder to digest the opportunity to miss out on the huge profits that the market is currently offering to investors of all skill levels.
A clear understanding of my personal goals, an understanding of my success and creating a list of my own desires and needs rather than the dreams of others and trying to achieve them, has become a colossal factor in extinguishing the fire of greed in my own trade and daily decision making.
I also added a link to the books “Must Read” that were helpful in my way of dominating my emotions when making decisions. I will update this as I see fit ..
One method I found useful was to carefully measure success, wealth, goals, and most importantly, happiness. Nowadays it is very easy to allow external influences to affect our happiness and success. Social networks undermine us every day with the success of others.