Buying and Selling Has Necer been so Unpredictable

The stock market is an interesting beast, and one that often entices people to give it a try at least once in their lives. People of knowledge or intelligence feel particularly attracted to it, feeling that their pedigree and savvy will allow them to win out in the long run. But playing the stock market requires controlling your emotions as much as it does the careful evaluation of a stock and the marketplace in general.

Consider the proposed idea by German Jochen Steffens.

He introduces us to an intelligent new investor John. John has been successful in his career and personal life, and has recently been advised by a friend to sink some money into the stock market. Believing this to be a good idea, John studies the market for a bit, selects his stock, and sinks $30,000 into it. Within a month he's seen a $5,000 return on his investment, nearly on par with his salary. Not a bad haul at all for a few hours of study and a phone call. Like so many others, and like people who get hooked on gambling, this initial run gets John thinking over his head, believing himself to be an astute judge of stocks, and possibly making a living from nothing but the stock market.

So he sinks another $30,000 in a stock after careful consideration and waits for it to rise. Oddly enough it begins to drop. Sure that this is just a blip on the radar, John patiently waits for the inevitable rise, only to see it drop some more and yet more. The stock is now down to 60% of its original value and John is convinced the sellers are panicking and simply not as intelligent as he is. He continues to hang on, unrelenting in the notion that he is right and the others are wrong. The stock has soon dropped to 50% of its value, and hovers around that mark for a good year, before John finally accepts defeat and gives it up.

Of course as fate would have it, the company eventually gets purchased and restructured, a new product is brought to the market and the stock rebounds dramatically.

All of this is to demonstrate the psychological effects that the stock market can have on people. John was not necessarily wrong in hanging on to the stock, but he did so for the wrong reasons. He was also not wrong to eventually sell that stock, even though in hindsight it was a costly move. Many people follow the same slow moves on changing to a rewards VISA for example. Get some points for you purchases at least.

This all demonstrates that the stock market is a game that requires degrees of both emotional control and self restraint, and the knowledge and intelligence to make those emotional traits worthwhile. Recognizing market trends and adjusting to them is one of the greatest attributes of a stock trader. One must change with the times and not get set in old patterns or old thinking. Sure things can become blunders in an instant, and penny stocks rise to dizzying new heights.

The old poker saying "you gotta know when to hold'em, know when to fold'em" is very much true of the stock market as well.

About the Author

Landon McGehee frequently contributes to http://www.everlife.com. Today is the perfect time to find out more about chase rewards platinum visa.

Comments

No comments posted.

You do not have permission to comment. If you log in, you may be able to comment.

Article Advise

Infobious