Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

How to Handle the Quicksand of Trading

InvestorEducation / Learn to Trade Sep 23, 2008 - 09:48 AM GMT

By: Nazy_Massoud

InvestorEducation

Best Financial Markets Analysis ArticleIn the past few weeks, have you felt like you were in quicksand?

By the markets' volatility causing a lot of uncertainly and P&L swings, does it feel like the harder you try, the worse things get?

Do you feel overwhelmed?


Well, you are not alone. These are very hard times in the markets. One of the hardest things to deal with is uncertainly. You hear a lot about risk management which has different aspects. The normal ones are market, credit and operational risk. One of the most important risks that people seldom talk about and it is much more evident in these markets, is the emotional risk .

JP Morgan has a group called the Behavioral Finance Team which deals with how emotions influence investments.

In the past few weeks, you have been witness to the panic that has been in the markets. You have seen that babies have been thrown out with the bath water.

So how do you manage the emotional risk?

1. Clear your mind

Do not make emotional decisions. Realize that emotions are emotions. What differentiates us is how we react to these emotions.

This reminds me of an interview that I watched. The interviewer was talking with a surfer and asked him what he does when a big surf comes and he goes underwater. The surfer said it was simple. “ If I panic, I only have 3-5 seconds of air to breathe. If I stay calm, I have 45-60 seconds of air.

What does surfing have to do with trading? In these choppy markets, if you let your emotions get the better of you, you could lose all of your capital. However, if you take a moment and think about your trades, you can have much better results.

2. Look at your portfolio objectively

Think about your portfolio as if you are looking at the portfolio of your best friend.

Ask yourself:

•  What was your trade horizon?

•  Are the reasons that you executed your trade still valid?

•  Can you tolerate the P&L swing?

•  Does it impact your health and well-being?

Based on your answers, you can make more informed decisions.

3. Limit your input

With the current state of the market, anyone and everyone is talking about what is happening in the market and what we should do. If we want to listen to all of them, it becomes very confusing, and the confused mind does not make a decision.

Instead of listening to everybody, pick the top 3 people that you respect and listen to them. This way you can remain focused and have much better trading results.

4.  Trade the market as is

Trade the markets as they are and not as you want them to be.

If we don't pay attention to what is happening in the markets and what influences are at play, we are going to be in a losing game.

After all, hope is a lousy hedge.

5.  Be in a supportive environment

We often surround ourselves with the people that we like and we listen to them. In any business, it is important to listen to the people that we respect and are successful.

How often have you heard of traders whose spouse and/or friends are not supportive? These people have little or no risk tolerance. As a result, these traders allow the fear of their spouse and/or friends to become the boundaries of their success .

Why not surround ourselves with the mentors that are successful in their fields?

To summarize, the steps that we can take to deal with our emotional risks are:

•  Clear your mind

•  Look at your portfolio objectively

•  Limit your input

•  Trade the market as is

•  Be in a supportive environment

Remember, not the most talented or skilled person wins the game. The game is won by the ones who can manage their emotional risk and have a Mental Edge.

Here is to making trading success your habit™,

By Nazy Massoud

PS. For more Mental Edge tips and reports on how to have more profitable trades, go to www.MentalEdgeTrading.com .

Copyright © 2008 Nazy Massoud

ABOUT THE AUTHOR : Nazy Massoud, a Wall Street Insider, shows traders, investors and hedge fund managers how to develop the mental edge to execute trades more profitably. For more tips and a FREE report on "The 3 Biggest Psychological Triggers That Can Make or Break a Trader," go to www.MentalEdgeTrading.com .

Nazy Massoud Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in