Monday, March 25, 2013

Control Your Emotion or Other People Will Control You

Many people are controlled by fear. Fear of losing an opportunity causes you to act in haste. Fear of losing your paper profit causes you to sell out too early. And fear of losing everything causes you to sell right at the bottom. Although selling right at the bottom is caused more by frustration than anything else, fear also plays a part. How do we overcome these kind of fears? Knowledge is the best weapon. When you know, people cannot scare, frighten or intimidate you. They can't con you in anyway. Knowledge is your first key to success.

Hope causes you to hold on to a falling stock. Sometimes your hope is rewarded; your stock turns around and you make a profit. Unfortunately, hope often becomes hopeless. Experience tells me that it is much better to keep an uptrend stock and let go a falling one. This strategy is vital, simply because a trend in motion is likely to continue. Hope also causes people to buy into excessively high PE stocks. I prefer what is good today and better tomorrow.

You often hear people say: "Don't be greedy." Actually greed is necessary if you want to make big money. How else can you get a ten-bagger if you are not greedy. But unsatisfied greed is bad. Bulls make money, bears make money but never a pig, so goes the saying. (A pig is someone who will not sell, not matter how high the price goes up.)

Everything has a fair price. When a stock is overpriced, your concern is to sell it at a good price. The best way I know, is to use a trailing stop-loss. If you have no idea what a trailing stop-loss is, you can check it up at Investopedia.com.

This device is to prevent you from selling out too early.