When trading stocks, the common wisdom is to trade logically and without emotion. In doing so, you will make fewer mistakes and potentially lead to stronger profits. But why is that the case? Why can’t you begin to love a stock that is making profitable moves? Let’s explore the reasons why you cannot let your emotions rule your trading.
Emotional stock trading can lead to losses in one major way. If you remain in a stock once the price goes below your buy-in price, you begin to lose money. You may even continue to hold the stock after it falls below your stop-loss point. There’s only one reason for this: you’ve fallen in love with the stock. You feel strongly that the company’s shares should be worth more and you JUST KNOW the price will start heading back upward in the next day or so. Had you only gotten out at your stop-loss point, you wouldn’t now be down twice that amount. Do yourself a favor and don’t let any ‘happy feelings’ you have for your stocks influence your trading.
I know you’re human, so it should come as no surprise that repeated disappointment can lead to discouragement. Letting your emotions keep you in losing trade after losing trade can wear you down. You’ve no doubt spent a lot of time and money while learning to trade. Don’t throw all of that away because you’re discouraged. Ditching that emotional tie to stocks will leave you with more profitable trades and less disappointment. This will not only keep you happier and less likely to quit, it also makes you a better trader, overall.
Feelings can be deceiving. Have you ever made the wrong judgment about someone’s character? The same goes for stock trading. If you stick to the numbers, you’ll be all right. After all, the logical, factual numbers will not lie to you. For example, if a company’s revenues are shrinking and the stock price is stalling, don’t wait for any more proof. Let those statistics and chart indicators be your guide. Remain objective when evaluating your position. Facts aren’t fickle, like emotions can be.
You should now see that while trading can be an emotional process, emotion does nothing to help you. In fact, it can hurt your bottom line. Your portfolio can dwindle simply because you like a company’s product, or believe in the cause they’re working for. When trading, you simply cannot allow that to cloud your judgment. Trade emotion-free, and you’ll begin to see more stock market success.
Now find out how to eliminate emotional stock trading.
