November 1, 2012
- in Uncategorized by schooloftrade
The Psychological Investor Cycle
I am sure that when you read this post that you will relate
to it on some level!
1. OPTIMISM – It all starts with a hunch or a positive outlook leading us to buy /sell whatever instrument we are trading.
2.
EXCITEMENT – Things start moving our
way and we get giddy inside. We start to anticipate and hope that a possible
success story is in the making.
EXCITEMENT – Things start moving our
way and we get giddy inside. We start to anticipate and hope that a possible
success story is in the making.
3.
THRILL – The market continues to be favorable and we just can’t help but
start
to feel a little “Smart.” At this point we have complete confidence in trading
system.
THRILL – The market continues to be favorable and we just can’t help but
start
to feel a little “Smart.” At this point we have complete confidence in trading
system.
4.
EUPHORIA – This marks the point of maximum financial risk but also maximum
financial gain. Our investments turn into quick and easy profits, so we begin
to ignore the basic concept of risk we now start trading anything that we can
get our hands on to make a buck.
EUPHORIA – This marks the point of maximum financial risk but also maximum
financial gain. Our investments turn into quick and easy profits, so we begin
to ignore the basic concept of risk we now start trading anything that we can
get our hands on to make a buck.
5.
ANXIETY – Oh no – it’s turning around! The markets start to show their first
signs of taking your “hard earned” gains back. But having never seen this
happen, we still remain ultra greedy and think the long-term trend is higher.
ANXIETY – Oh no – it’s turning around! The markets start to show their first
signs of taking your “hard earned” gains back. But having never seen this
happen, we still remain ultra greedy and think the long-term trend is higher.
6.
DENIAL – The markets don’t turn as quickly as we had hoped. There must be
something wrong we think to ourselves. Our “long-term” view now shortens to a
near-term hope of an improvement.
DENIAL – The markets don’t turn as quickly as we had hoped. There must be
something wrong we think to ourselves. Our “long-term” view now shortens to a
near-term hope of an improvement.
7.
FEAR – Reality sets in that we are not as smart as we once thought. Instead
of being confident in our trading we become confused. At this point we should
get out with a small profit and move on but we don’t for some stupid reason.
FEAR – Reality sets in that we are not as smart as we once thought. Instead
of being confident in our trading we become confused. At this point we should
get out with a small profit and move on but we don’t for some stupid reason.
8.
DESPERATION – All gains have been lost at this point. We had our chance to profit
and missed it. Not knowing how to act, we attempt to do anything that will
bring our positions back into the black.
DESPERATION – All gains have been lost at this point. We had our chance to profit
and missed it. Not knowing how to act, we attempt to do anything that will
bring our positions back into the black.
9.
PANIC – The most emotional period by far. We are clueless and helpless. At
this stage we feel like we are at the mercy of the market and have absolutely
no control
PANIC – The most emotional period by far. We are clueless and helpless. At
this stage we feel like we are at the mercy of the market and have absolutely
no control
10.
CAPITULATION – We have reached our breaking point and sell our positions at any
price. So long as we can get out of the market to avoid bigger losses we are
content.
CAPITULATION – We have reached our breaking point and sell our positions at any
price. So long as we can get out of the market to avoid bigger losses we are
content.
11.
DESPONDENCY – After exiting the markets we do not want to buy stocks ever again. The
markets are not for us and should be avoided like the plague. However, this
rare point marks the point of maximum financial opportunity.
DESPONDENCY – After exiting the markets we do not want to buy stocks ever again. The
markets are not for us and should be avoided like the plague. However, this
rare point marks the point of maximum financial opportunity.
12.
DEPRESSION – We drink, cry and/or pray. How could we have been so dumb we think to
ourselves. Some start to correctly look back and analyse what went wrong. Real
traders are born here, learning from past mistakes.
DEPRESSION – We drink, cry and/or pray. How could we have been so dumb we think to
ourselves. Some start to correctly look back and analyse what went wrong. Real
traders are born here, learning from past mistakes.
13.
HOPE – We can still do this! Eventually we return come to the realization the
market actually does have cycles (shocking). We begin to start analyzing new
opportunities.
HOPE – We can still do this! Eventually we return come to the realization the
market actually does have cycles (shocking). We begin to start analyzing new
opportunities.
14.
RELIEF
– The markets are turning positive again and we see our prior investment come
back around. We regain our faith (although small) in our ability to invest our
money. The cycle start all over again!
RELIEF
– The markets are turning positive again and we see our prior investment come
back around. We regain our faith (although small) in our ability to invest our
money. The cycle start all over again!
