Buying & Selling Stocks : Control Your Emotions by Christine Abbate

When traders lose money, it is often because they cannot control their emotions. Those who act on their emotions often make irrational decisions. So, learning how to control emotions when trading will be one of the most essential aspects to success. Successful traders can view the market objectively and are emotionally disconnected from market happenings.

Fear and greed are the two main emotions that traders need to overcome. They are both very powerful emotions. When humans foresee harm, they instantly feel trepidation and react quickly. In the market, reacting to fear usually causes a trader to make an impulsive decision that leads to a trading error. Fear of losing money may cause someone to sell a stock before their target price.

Triumphant traders are not affected by fear and greed. When a stock falls, they are not overcome by fear. They expect small drops in the market. When an inexperienced trader sees a stock reach its target, they are often driven by greed and keep the stock in the trade, hoping to make an even larger profit. So, set your target price, accept your profit and sell. You haven't made a profit until you actually sell the stock.

Fear and greed are the main reasons why the inexperienced trader buys and sells at the wrong times. This is why skilled traders are able to use the volatility of the market to make large profits, while inexperienced traders lose, lose, lose. Regardless of what the market does, a successful trader has a plan and sticks to it.

While at first it may seem hard to buy and sell objectively, the more trading experience you gain, the easier it becomes. There are steps you can take to learn how to stay unemotional and objective:

-Limit your risk by trading with money that you can afford to lose. If a loss won't really hurt you, it will be easier to convince yourself that the outcome is insignificant. Once you have convinced yourself that the outcome is not important, it will be easier to remain emotionally detached.

-Know your risk tolerance. If big risks make you uncomfortable, don't make dicey trades. Start by making safe investments. As you become more knowledgeable and less emotional, start increasing your risks.

-Do your homework. Come up with a trading strategy and be sure to stick to it. Stay away from stock message boards until you gain confidence in yourself. They may have the ability to sway your emotions and thus sway your trade. Successful traders can think for themselves. They don't let the stock boards tell them what to do.

-If you find yourself obsessing over your stock, you are starting to trade on emotion. Stop yourself from becoming attached and confidently remind yourself of your trading strategy.

-Don't trade just to trade. Even though the stock market can be an exciting place, and you probably feel like you are missing out on something, don't buy a stock for the heck of it. Instead, learn how to anticipate the market. Trading more often will not result in more profits. In fact, the cost associated with trading more often may actually cause you to become more emotionally involved. Wait for the ideal entrances and exits.

-Taking a loss is a part of trading. Instead of letting your emotions control you after a loss, come up with a plan for managing them. Some people say that your first loss is your best loss. This is because you will hopefully look back at what you did wrong and learn from it.

If you can learn how to trade without emotional involvement, you will always be more successful. The best way to learn how to emotionlessly trade is not to think of the stock as a company, but just think of it as a stock. As you gain more knowledge about the market, you will become a more confident trader. Begin by taking small steps to overcome your emotion. Study the market, and do your homework. Once you can think objectively, you are on your way to becoming a consistent and profitable trader.

About the Author

TheSUBWAY: Small Cap Stock Promoters (TheSUBWAY.com)
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