Smita Parekh 2nd Mar, 2019
Emotions can play a key role in how we think and behave. People’s everyday life seems profoundly emotional, every person experiences at least one emotion 90% of the time. The emotions we feel each day can compel us to take action and influence the decisions we make about our lives, both large and small. For example when faced with a nerve-wracking exam, you might feel a lot of anxiety about whether you will perform well and how the test will impact your final grade.
Similarly a trader too feels a variety and mix of various emotions while trading. This is also known as a trading psychology. Trading psychology refers to the mental and emotional aspects that will dictate a trader's decision and is an important factor in determining his success or failure in the trading process. Every trader faces 3 major emotions while trading in the stock market, they are Greed, Fear & Regret.
Greed is defined as excessive desire to accumulate more wealth. It can be both beneficial and destructive depending on how a trader utilizes it in different situations. It has positive results in the bull market. The longer a trader stays on the game, the greater wealth he can gather. However, it is destructive when suddenly a bear market strikes in.
Fear on the other hand is the exact opposite to greed. It is the one that holds back a trader in taking the steps in the trading process. And like greed, it can be both destructive and useful depending on the situation of the market.
Regret is another emotion a trader must take careful consideration. There are many traders who jumped into the trading process because of regret and finally finding themselves losing more money in the process.
To have a successful career in the stock market one must leave all emotions aside. He should trade more like a robot and less like an emotional person.