Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
Stock Market Deviation from Overall Outlook for 2020 - 22nd Feb 20
The Shanghai Composite and Coronavirus: A Revealing Perspective - 22nd Feb 20
Baltic Dry, Copper, Oil, Tech and China Continue Call for Stock Market Crash Soon - 22nd Feb 20
Gold Warning – This is Not a Buying Opportunity - 22nd Feb 20
Is The Technology Sector FANG Stocks Setting Up For A Market Crash? - 22nd Feb 20
Coronavirus China Infection Statistics Analysis, Probability Forecasts 1/2 Million Infected - 21st Feb 20
Is Crude Oil Firmly on the Upswing Now? - 20th Feb 20
What Can Stop the Stocks Bull – Or At Least, Make It Pause? - 20th Feb 20
Trump and Economic News That Drive Gold, Not Just Coronavirus - 20th Feb 20
Coronavirus COVID19 UK Infection Prevention, Boosting Immune Systems, Birmingham, Sheffield - 20th Feb 20
Silver’s Valuable Insights Into the Upcoming PMs Rally - 20th Feb 20
Coronavirus Coming Storm Act Now to Protect Yourselves and Family to Survive COVID-19 Pandemic - 19th Feb 20
Future Silver Prices Will Shock People, and They’ll Kick Themselves for Not Buying Under $20… - 19th Feb 20
What Alexis Kennedy Learned from Launching Cultist Simulator - 19th Feb 20
Stock Market Potential Short-term top - 18th Feb 20
Coronavirus Fourth Turning - No One Gets Out Of Here Alive! - 18th Feb 20
The Stocks Hit Worst From the Coronavirus - 18th Feb 20
Tips on Pest Control: How to Prevent Pests and Rodents - 18th Feb 20
Buying a Custom Built Gaming PC From Overclockers.co.uk - 1. Delivery and Unboxing - 17th Feb 20
BAIDU (BIDU) Illustrates Why You Should NOT Invest in Chinese Stocks - 17th Feb 20
Financial Markets News Report: February 17, 2020 - February 21, 2020 - 17th Feb 20
NVIDIA (NVDA) GPU King For AI Mega-trend Tech Stocks Investing 2020 - 17th Feb 20
Stock Market Bubble - No One Gets Out Of Here Alive! - 17th Feb 20
British Pound GBP Trend Forecast 2020 - 16th Feb 20
SAMSUNG AI Mega-trend Tech Stocks Investing 2020 - 16th Feb 20
Ignore the Polls, the Markets Have Already Told You Who Wins in 2020 - 16th Feb 20
UK Coronavirus COVID-19 Pandemic WARNING! Sheffield, Manchester, Birmingham Outbreaks Probable - 16th Feb 20
iShares Nasdaq Biotechnology ETF IBB AI Mega-trend Tech Stocks Investing 2020 - 15th Feb 20
Gold Stocks Still Stalled - 15th Feb 20
Is The Technology Stocks Sector Setting Up For A Crash? - 15th Feb 20
UK Calm Before Corona Virus Storm - Infections Forecast into End March 2020 - 15th Feb 20
The Growing Weaponization of Space - 14th Feb 20
Will the 2020s Be Good or Bad for the Gold Market? - 14th Feb 20
Predictive Modeling Suggests Gold Price Will Break Above $1650 Within 15~30 Days - 14th Feb 20
UK Coronavirus COVID-19 Infections and Deaths Trend Forecast 2020 - 14th Feb 20
Coronavirus, Powell and Gold - 14th Feb 20
How the Corona Virus is Affecting Global Stock Markets - 14th Feb 20
British Pound GBP Trend and Elliott Wave Analysis - 13th Feb 20
Owning and Driving a Land Rover Discovery Sport in 2020 - 2 YEAR Review - 13th Feb 20
Shipping Rates Plunge, Commodities and Stocks May Follow - 13th Feb 20
Powell says Fed will aggressively use QE to fight next recession - 13th Feb 20
PALLADIUM - THIS Is What a Run on the Bank for Precious Metals Looks Like… - 13th Feb 20
Bitcoin: "Is it too late to get in?" Get Answers Now - 13th Feb 20
China Coronavirus Infections Soar by 1/3rd to 60,000, Deaths Jump to 1,367 - 13th Feb 20
Crude Oil Price Action – Like a Coiled Spring Already? - 13th Feb 20

Market Oracle FREE Newsletter

Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

Five Investor Strategies to Control Market Greed

InvestorEducation / Learning to Invest Jan 13, 2011 - 08:12 AM GMT

By: Jared_Levy

InvestorEducation

Best Financial Markets Analysis ArticleMany of us (myself included) are drawn to the markets by the same force that can destroy our accounts: greed. While there are several ways in which greed can hurt us, there are five personal strategies that we can employ to control the market greed that is woven into our social fabric.


Personal Strategy 1: Be Aware That Greed and Fear Drive Price
Some may argue this über-simplistic view of the equity markets, but when you reduce that statement down to its purest form, it's true! When someone is willing to pay a higher price for a stock, that person, most likely on some level, is satisfying his or her greed instinct, in that they want to profit from their belief that the stock is moving higher. This works the same when fear sets in and you are driven to sell a stock at a lower price because of whatever fear you may have at that moment.

The problem with the word greed is that it carries a negative connotation and most of us don't like to admit our negatives.

Webster's Dictionary defines greed as "a selfish and excessive desire for more of something (as money) than is needed."

But what do we "need"? Is it bad to want to make a better life for yourself, pay your bills, and pay off your home or credit cards? Are we really being greedy? Maybe it should be that "need" and fear drive prices.

You see, for most of us who invest, we do so in order to make a better life for ourselves or our families, and enhance our way of life and retirement. The real problem is that these "wants" and "needs" in life, which are perfectly normal, sometimes end up getting in the way of our being a successful trader or investor.

Personal Strategy 2: Get to Know Yourself a Little Better
When I first started out as a trader, I had a lot to prove. I grew up from humble beginnings in Philadelphia, and I was always scared of being poor. I remember making my first trades thinking, "This could be the one that makes me a millionaire." I learned quickly that a thought process like that was a surefire way to miss my mortgage payment and even worse, lose my job as a trader.

The truth is, I was lucky enough to be taught at an early age from my mentor that the game is all about getting as many "hits" as you can and just staying on base as much as possible.

Translated into market talk, that means that you should strive to make as many good trades as you can (there will be losers), and once you are in a good trade, have a realistic profit target and either protect, scale out or simply exit the trade and walk with your profits, even if they are small. Staying on base means keeping your loss amounts minimal and moving on.

(Investing doesn't have to be complicated. Sign up for Smart Investing Daily and let me and my fellow editor Sara Nunnally simplify the stock market for you with our easy-to-understand investment articles.)

Personal Strategy 3: Listen to Your Gut
You would think that many retail investors fail because they don't have some secret knowledge or technology at their fingertips, but the truth is that the Internet offers you more resources now than when I started and I was able to prosper.

Having good technology and knowledge helps, but it's not the key to real success.

If you have been investing for over two years, you have probably got the basics down and can sense when stocks are being overbought or oversold. Follow those instincts and read the commentary from analysts and editors of reputable financial publications to confirm.

Usually the first clue is when your mother (who doesn't know finance) starts talking about the stock market. By the time it reaches someone who has minimal interest, the trend is probably coming to an end.

Personal Strategy 4: You Don't Have to Make That Trade
Yesterday, over 2 billion shares changed hands on the Nasdaq stock market alone; 9,500 of those trades were in blocks of 10,000 shares or more (generally there is some motivation if you are buying or selling 10,000 shares).

The point is that there is always opportunity long or short in the market -- don't force a trade because you feel like you "missed out." Trust me, there will be thousands more investment possibilities to come.

I remember from March-April 2009, the S&P 500 rose about 23% in a month's time. People couldn't believe it; they thought they missed it. Then after rallying some more, there was another 17.5% pop from July to August. At this point, many thought the rally was surely over, but then from its August 2009 highs until the end of the year, the S&P rallied another 13%... See what I mean!

Personal Strategy 5: Fix the Problem
The bottom line is that it's not technology, information, computers, account size, age or lack of intuition that is the biggest success culprit; it is our own greed and lack of action (or overaction) that gets us in trouble.

One exercise you can do to work on this is open up a virtual trading account at your brokerage firm (most offer them for free). In that account, I want you to make the investments you would make in your regular account, with the same typical investment size. But in this account, once you are in a profit of at least 5%, sell your position, and once you are in a loss of 4%, do the same. Also, once you get profitable in a trade, move your stop-loss just above where you would breakeven in the trade to prevent going back into the red.

Test this method out on paper and see if it helps or hurts you. It's OK to take losses; just don't let them overrun your winners. If you are 50/50 at picking your investments, this simple tip should help ensure you stay in the green.

Don't forget to follow us on Facebook and Twitter for the latest in financial market news, investment commentary and exclusive special promotions.

Source : http://www.taipanpublishinggroup.com/tpg/smart-investing-daily/smart-investing-010711.html

By Jared Levy
http://www.taipanpublishinggroup.com/

Jared Levy is Co-Editor of Smart Investing Daily, a free e-letter dedicated to guiding investors through the world of finance in order to make smart investing decisions. His passion is teaching the public how to successfully trade and invest while keeping risk low.

Jared has spent the past 15 years of his career in the finance and options industry, working as a retail money manager, a floor specialist for Fortune 1000 companies, and most recently a senior derivatives strategist. He was one of the Philadelphia Stock Exchange's youngest-ever members to become a market maker on three major U.S. exchanges.

He has been featured in several industry publications and won an Emmy for his daily video "Trader Cast." Jared serves as a CNBC Fast Money contributor and has appeared on Bloomberg, Fox Business, CNN Radio, Wall Street Journal radio and is regularly quoted by Reuters, The Wall Street Journal and Yahoo! Finance, among other publications.

Copyright © 2011, Taipan Publishing Group


© 2005-2019 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

6 Critical Money Making Rules