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Stockmarket investing

If you want to invest your money in the stock market you have to understand first how the stock market works.






If you want to invest your money in the stockmarket you have to understand first how the stock market works.

Emotions and psychological factors are much more involved than you ever thought, because stockmarket investing is influenced by humans decisions all the time.

Let’s begin with the markets themselves, and with fear and greed.

We have all heard the cliches about fear and greed.

They rule the markets. In fact, that’s all the markets are a reflection of these emotions.

In order to make money trading, you must learn in control your fear and greed.

We all have in deal with our runaway emotions at various times in life, and these emotions really begin to run away when we trade.

We give in in our fear when we don’t take the next trade because we’ve just been through a string of losers and fear losing again.

We give in in our fear when we put our stop loss too close and get stopped out of a trade without giving the trade enough room to develop.

We give in to our fear when we freeze as a trade starts to lose money, and we don’t take the exit signal because we’re afraid of losing money.

We give in to our greed when we take a profit early, before the regular signal, because we don’t want in give back any of the profits.

We give in to our greed when we trade more contracts or shares than we normally would because we feel good about this trade.

So we start with the question, “How can we understand the markets?”

If we understand how they work, we can get a better understanding of ourselves, and in turn be better traders.

Controlling greed takes discipline. Stockmarkets exists to facilitate trade.

Facilitating trade means that the markets will do anything they can to get individuals to participate in stockmarket investing.

How they do this is through movement. Markets move up and down searching for buyers and sellers.

The crucial point here is that markets must move for their survival.

Understanding this literally changed the way I thought about stockmarket investing.

Think about it. Markets have to move!

This concept is major for anyone who has had to sit through a trend-foilowing system trading in a sideways market.

The knowledge that the market has to move eventually changes the way you look at stockmarket investing.

It gives you confidence that the string of losses can’t continue indefinitely.

It eliminates the fear!

If it does not continue to bring traders in, to lure the buyers and sellers, the market will cease to exist.

And the prime directive of a stockmarket is survival. To keep traders interested, the market has to move.

It cannot remain in a small trading range or traders will lose money, become disinterested and leave.

Eventually there will be less and less liquidity, traders will stop trading, and the market will die.

Knowing that a market must facilitate trade and move, or else the, has given me great confidence in stockmarket investing.

When I am forced to trade through quiet markets, I remember this principle.

This principle has reduced my fear and increased my confidence immeasurably.


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