Wednesday, April 4, 2012

Psychology of Emotions: 7 - Hate

EDIT: At the time this blog entry was posted I had a Youtube video here. That has been removed but I want the rest of my content to be remain. Nothing hidden no past mistakes ignored. All out in the open.

With listing hate separate from anger does it seem like I am nitpicking here? Can't I just say "Don't get emotional with your trading and investing?" I could but that would do nothing.

As I mention in the video, to overcome a problem we have to address its root causes. Have you watched a friend or family member deal with a problem and they come to the wrong conclusion? They then proceed to spend a lot of energy and time working on fixing the wrong thing. All the while you are watching and knowing it will do them no good because they don't get it. That's exactly where we can find ourselves with our financial activities.

This is especially dangerous when we are starting out. For example on various forums and communities I will see a person talking about a stock, "Why did we have this massive drop today? What happened? Whats wrong?". Upon checking the price of dropped from $40 to $39.60... 1%.
Whats wrong is that they are new and not used to price changes yet. Or possibly they are looking at a daily chart where that 1% drop moved across their entire screen making it look scary.

Why is this a dangerous time? As they look for answers they will encounter other emotionally driven investors.
"It dropped because congress is using insider trading to work with Wall Street to manipulate the market!"
"The 1% stole your money its all a Ponzi scheme!"
Here we have a combination of Hate shifting blame and Anger helping to point the finger at mysterious figures.

My answer to these new investors (and traders) "Why did it drop? Because it did. 1% drops happen and it happens a lot. There is no way we can tell exactly why but we can prepare and plan for it to happen again."

Disclaimer: The investments and trades in my videos and blog entries are not recommendations for others. I am not a financial planner, financial advisor, accountant, or tax adviser. The financial actions I talk about are for my own portfolio and money and only suited for my own risk tolerance, strategy, and ideas. Copying another person's financial moves can lead to large losses. Each person needs to do their due diligence in researching and planning their own actions in the financial markets.

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