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Markets Driven by Greed and Fear

Fear and Greed.

These two emotions are more important to human achievement or failure than any other feelings we have. Fear and greed both allude to an innate emotional state. These two emotions alone have caused tens of millions of dollars to be made and lost. In relationships, business, and trading. Why then do so many educational programs, books on stock trading, and online courses completely avoid this subject?
Financial Market Greed and Fear

Perhaps they are not avoiding the subject of emotions, but rather confronting it head-on by imparting particular techniques and skill sets to their readers.

It is common knowledge that feelings can make people feel a certain amount of pleasure or pain. It is also common knowledge that mood, frame of mind, wants, and passions are interconnected with emotions. The list is endless. How can we as individuals develop the necessary skill set to deal with these emotions in life, business, and trading?

Given that our emotions have been evolving for more than 2 million years, Charles Darwin suggested that they truly serve a purpose for humans. Instead of blaming these incredible abilities for our poor decision-making, shouldn't we be utilizing them to our advantage? I firmly believe that ineffective decision-making is entirely the result of laziness and a lack of preparation, not of emotions.

From One of the Greats, a Lesson!

If we did not bring up Warren Buffett's strategy, I would be doing my readers a disservice. one of today's most prosperous investors. Warren Buffet achieved enormous success by adhering to his plan. We learned from Warren Buffett how crucial and advantageous it is to follow a strategy. Buffett and his partners adhere to a few straightforward rules when selecting whether or not to invest in a firm themselves, one of which entails attempting to ascertain the company's longevity.

Fear can take over the market in the same way that greed does. When stocks experience significant losses over an extended period of time, the market as a whole may get increasingly anxious about experiencing more losses. However, being overly afraid might be a fatal error. Successful traders and investors alike move at precisely this moment. This is where the real money is made.

Investors easily switch from one "safe" investment to another, much like greed dominated the recent cryptocurrency surge or fear dominated news stories about probable trade war outcomes. It turns into a never-ending game of cat and mouse.

Money is pouring into the stock market at an unprecedented rate, defying numerous technical signs that continue to scream that a correction is inevitable. The influx of headlines that state "ALL TIME HIGH" has retail investors beaming with glee. Should individual investors be overtaken by fear of a major correction?. Granted, losing a significant amount of the value of your retirement portfolio is a bitter pill to take, but missing out on the market's present enormous gains is even more difficult to stomach.

A major contributor to putting out the greed flame in my own trading and daily decision-making has been having a clear grasp of my own personal goals, an understanding of my success, and compiling a list of my OWN wants and requirements.

I've also included a list of "Must Read" books that have helped me control my emotions when making decisions. This will be updated as necessary.

Being careful with how I assess success, wealth, ambitions, and most importantly happiness has proven to be one strategy that has worked for me. Nowadays, it's simply too simple to let outside factors effect our success and pleasure. Social media blasts us day in and day out with the achievements of others.
 

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"Markets Driven by Greed and Fear" was written by Mark under the Finance category. It has been read 138 times and generated 0 comments. The article was created on and updated on 22 October 2022.
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