When I buy the price of the stock goes down. and when I sell the price goes up?
these statements are very common in Nepalese investors community, have you any idea why this is happening?
I think this situation occurs when a trader struggles to manage his psychology according to the ups and downs of the market. As we all know, the market moves in its direction and no individual has control over it. so, what can an investor do about this situation?
I believe an investor or trader should know how to manage his psychology. when we by the stock either the stock will go up or down or in sideways. Are we ready do for all the moves of the stock? Normally when it goes up there is no problem what if the stock goes down? Have you set up your stop loss at a certain level? I think the stock market is a game of probability so the trader needs to be ready for all these probabilities of the market. Uncertainty is the key features of the stock market so every investors or trader have to prepare himself to deal with it.
Many traders changed themselves, into investors when their short-term trade goes down? what about you? if are facing the same problem maybe it is time for you to work on your psychology.
Even if when the stock goes the trader is not sure when to take the profit. sometimes a trader waits too long the profit changed into a loss. Some time he takes profit too early the stock gains 100% or more in that movement the trader becomes very sorry for himself.
I think this problem occurs for two reasons first the trader does not know what type of trader is he? is a long term investor or a short-term trader. if a person doesn’t define himself clearly, he/she will be caught on indecisiveness?
this indecisiveness will affect his decision-making ability and many problems are seen the trades. for example, should I buy? should I sell? should I hold? I should not have sold and so on.
Another reason I think is normally the trader spends a lot of time researching what to buy and when to buy but he spends very less time when to sell the stock. I believe selling is as important as buying the stock. it is through selling we can make a profit into real money and from selling, we can save our capital by using a stop loss. I think one way of learning selling techniques is reading some trading books or keeping our trading journal. If we keep all recording of our trades why did we buy and why did we sell and if we analyze the reasons behind every trade. Then we may able to find how are we making decisions. Are we improving or are we making the same mistake, again and again, etc. this may help us to rectify our mistake and correct them?
Hence, the psychology of a trader is vital to make the trader profitable. I want to end the article with a quotation from Mark Douglas who has highlighted the importance of psychology in his book “Trading in the Zone”. He warns, “If the market’s behavior seems mysterious to you, it’s because your own behavior is mysterious and unmanageable. You can’t really determine what the market is likely to do next when you don’t even know what you’ll do next.” Ultimately, “the one thing you can control is yourself He adds, “The traders who can make money consistently. . . approach trading from the perspective of a mental discipline.