Investing Psychology - Precisely Why Investors Intentionally Make Terrible Choices

By: Sam Gurarenova

In stock trading many times, it happens that investors will purposefully make choices that make losing trades. Now nobody is speaking about losses that can come about as a result of trying out a trading plan or a certain indicator. Neither am I thinking about simple blunders committed simply by accident. When our goal is to profit, then why would we do these things which are obviously against what we know to be right? This phenomenon has several very undesirable repercussions which can be experienced quite regularly within the investing world.

An individual's self confidence may take a severe knock back when these deliberate errors take place on top of the loss of money. Other after-effects often include plenty of putting oneself down for having done these things. According to the degree of the mistake, this can wind up in an extremely bad cycle that compounds the trouble and sets the stage for it to take place again. Until the source of the problem is discovered and the investor takes action to address it, the self-sabotaging behavior will probably happen time and time again. This is simply not limited to newbies either.

For an example, one such trader (a genuine person who we are going to call Mark) of over 30 years was dealing with this every month for more than ten years since becoming an individual trader trading at home. Mark is doing almost everything in the futures business that there is to do. He worked on soybean harvesting and at the shipping docks loading ships and managing deliveries and purchases. For about another decade, Mark ran orders on the exchange floor. After that, he worked both for and as an introducing broker in the commodities industry until he chose to retire at the age of 59. Needless to say, Mark had a lot of experience in trading, but for nearly fifteen years, Mark has been losing money. But why, and why should he keep doing it?

Investing is definitely nothing new to Mark. As a broker, he was very successful. He's tried out almost every strategy and system there is. He's quite sharp and knows his way around the computer and what he's investigating on the charts. Mark really loves stock trading and looks forward to waking up each morning to get busy with his trading. On a regular day, he could make $500 or lose $900. Generally he loses. When his spouse gets home from work (indeed, she still works at the age of 69), he's normally angry in his easy chair after scolding himself and calling himself stupid. In all these many years, he still has yet to finish a year in the black. He's also worried about how much longer his spouse is going to permit him to go on like this.

If asked why he continues to trade in such a manner, and why he will not make use of a system which he knows will make him money, he simply says that he doesn't want to as they're boring. This is very true: a well-thought out trade, where you know what you'll do before you get in no matter which way the market moves can be very boring. Even so, when you enter trades without having a plan, or if you have deviated from your system, the suspense is often very intense.

Why do people take time to sit through movies instead of going directly to the end to find out if the hero triumphs or fails? Why do huge numbers of people watch baseball games, instead of simply look at the scores in the morning? It's the suspense, the rush and excitement of not-knowing the outcome, that brings the excitment. The minutes that are most enjoyed and fully hold our attention are when the ball is in the air and we have no idea if it is going to be caught or dropped, in the event the hero's fate hangs in the balance. As people, there is a part in all of us that craves that excitement.

At the conscious level, income is what everyone wants (who doesn't?). Plenty of people choose trading because trading offers the probability to realize very significant profit. The real risk is it also offers the rush and excitment that another element of us craves at the unconscious level. If that part of you isn't being satisfied through other channels of your life, it is highly probable to find its way into your trading and seek satisfaction there. Excitement from not-knowing the end result in your trading is where you want to avoid it. What you should do is always to include activities in your own life that offer ample thrills, and be ok with it if your stock trading is a bit boring - but money-making.

Article Directory:

| More

To learn more about how to be a profitable stock trader take a look at how to buy stocks

Please Rate this Article


Not yet Rated

Click the XML Icon Above to Receive Investing Articles Articles Via RSS!

Powered by Article Dashboard