Key Psychological Factors in Stock Market Success

I thought I might post an article on the way the stock market can affect you when you first begin trading. This is on your way to making your first million.

In a “Bull Market” the prevalent conditions of rising share prices, resources boom and general market hype actually encourages novice traders to begin trading. The mind set they have is, “that making money is easy.” And any losses they do have are quickly recuperated and therefore no lessons are learnt from the mistakes they have made.

When their first “Bear Market” or a downturn comes along and share prices drop, this is when the novice pays dearly for any mistakes they make.

Trading in the market is not a game for the novice. For being poorly armed and ill-prepared the novice quickly finds that the honeymoon period is over. To their dismay the original capital they started with has been quickly whittled away.

The novice who thinks that profit is the only thing to worry about is in for a very rude awakening.

The first emotions that the beginner will experience are “Fear and Greed.”(See past article.)

Fear will paralyse while greed will galvanise you into action. In other words
Fear makes you hold on onto a downward turning stock while greed encourages you to chase upward rising share prices.

The way the share price has moved in the past and also in the future can often be seen as fear and greed in action.

When any share transaction has taken place two things have happened. Firstly the “Seller” has sold to minimise any future losses. This is because He believes that the share price is not going any higher.

The buyer on the other hand believes that this stock is at a bargain price and that the stock will go higher still.

Only time will tell who will be happy or regretful. But at that instant both parties believes that they have done the best that is possible.

The best advice any beginner can have is to not rush in blindly.

Use the information that is available on this site and others. Take your time and learn, research, paper trade until you are fully prepared and then stick a toe in the water first before diving in.

Good luck and profitable trading.