Managing Your Emotions – The Key to Your Stock Market Success

Do you want to know the biggest difference between the average investor and the profitable investor? As you can tell by the question, they are not one and the same. The profitable investor knows how to manage their emotions. Please note: I did not say that they eliminate them. The emotions are still there. However, when you use a systematic approach and practice risk management, your decisions in the stock market become objective and logical. This is the critical key to being profitable in the long run. There are three critical questions that a systematic approach will answer.

 

1)    What stock to buy?

2)    When to buy the stock?

3)    When to sell the stock?

 

The average investor answers these questions based on __________. Yes, you fill in the blank, because their answer is completely subjective to what someone else says, how they feel, or any number of reasons.

 

In fact, this is one of the reasons why Cramer on CNBC has such a following. In the absence of judgment, he is an emotional guy in how he delivers information. Why? Well, as I mentioned before, the average investor trades based on emotion. So, he is merely matching the temperament of his target audience, the AVERAGE investor. And people tend to follow a person when they can identify with them.

 

The PROFITABLE investor uses resources and a system in their investing. I have been using a system for over 7 years now, and it has made a tremendous impact on the profitability of my investments in the stock market. I do not take anything I hear from anybody at face value. I check their recommendations based on my systematic approach.

 

So, the choice is yours. Do you want to be “average” or “profitable?”

 

All the best to you on your journey!

 

Aneshia

Comments

[Jack]

This is just a great info about stock trading.

[learn trading]

I never thought that managing emotion can really be a big help to be successful in this business. I don't think everyone knows this truth. Now I know why I keep on struggling. I will use this info to be a successful stock trader.

[Aneshia]

Hi Jack, Thanks for your feedback. All the best to you in your trading.

Aneshia

[Aneshia]

Hi "Learn Trading", Thanks for your comments. I know if more folks were aware of the impact of their emotions they would certainly get better results. When I first started investing in the stock market 13 years ago, I was certainly unaware of how my emotions were detrimental to my results. This was one of the first major lessons I mastered 8 years ago when I started trading successfully. All the best to you in your trading!

Aneshia

[invest in the stock market]

An investor may expect good earnings from a stock going forward and buy it at a high P/E. Another investor may not share the same enthusiasm and consider it an expensive stock. The right P/E depends on what you consider the earning potential of a stock.

[Aneshia]

Thanks for your comment. The P/E ratio is part of the fundamentals of a company. I agree with you; every investor sees the same information and makes different choices based on how they interpret the information. I use the Investors Business Daily (IBD) newspaper to help me choose stocks based on their fundamentals (P/E ratio, earnings per share, etc.).

[globaloption]

The stock market, even small amounts of money. However, investing a smaller amount of dollars and get a large gain is simply not safe. In fact, the threat is the reason that it is indeed feasible. Archiving solutions is really a good example of this. The reason for such a significant return can come from stock options will eventually end is simply because if they exercised or purchased. This makes it significantly more risky an investment then simply buy direct action.

[Investing in stocks]

Stock investing is a popular tool that many use for creating wealth. Anyone from teenagers to retirees can own stock and many of them do. You can never be too old or too young to be an investor but the faster you start the better off you will most likely be.

[Aneshia]

Thanks for your comments "Investing in stocks." I agree with you. It's definitely to your advantage to invest earlier than later. Use compound interest to your advantage without having to take as much risk. Depending on how conservative you are, your account may grow slower, but with time on your side, the benefits of compound interest helps you out alot. The Rule of 72 applies here as well.

[Aneshia]

Thanks for your comments, "globaloption." Most people believe that stock options are risky. The risk of stock options depends on how they are used.

Scenario 1: Trading stock options (which requires both buying AND selling to make a profit) involves high risk. Many people buy and don't know when to sell. If you wait too long, your option expires worthless and you're left with nothing. I don't recommend anyone trade stock options without getting training from a mentor first. Those that experiment with stock options without proper training first are swimming with sharks. Eventually, they will be eaten alive.

Scenario 2: Writing covered calls involves call options. However, they are much less riskier than trading stock options. I only have to sell a call option to make my profit. The key is selling the correct call option. You never want to sell a call option with a strike price that is less than your cost basis. Otherwise, if you get called out, you will be obligated to sell your stock at a loss. Education is important here too. Learn from a successful mentor. I have averaged 5% profit per MONTH in my self-directed retirement account using the writing covered call strategy. It works, if you use it correctly.

[investing in stocks]

I am also new investor in the penny stocks. I have heard from my friend that this is a risky way to make money. But it also has potential to make bigger benefits. Well, you have also shared god tips for the beginners. Thanks a lot.

[Share Market]

It was a awe-inspiring post and it has a significant meaning and thanks for sharing the information. Would love to read your next post too...

Thanks

Regards:

Share Market

[Aneshia]

Hi "Investing in Stocks," I have heard stories of folks making money in penny stocks. I am not sure of their rates of return. I will say this: the systematic approach I have been using over the past 8 years works for any stock with a ticker symbol, that has been in existence for at least 30 days. So, for example, an IPO (Initial Public Offering) would not work with my system. Whether it's penny stocks or regular stocks/ETFs, you still need a systematic approach for selecting the stock and knowing when to get in and when to get out.

[Aneshia]

Thanks "Share Market," will be posting some new information very soon. Have a great day!