The Ultimate guide to Getting over depression, mood swings & bad moods Based on psychology
Most of the reasons that make people lose money in the market are psychological. Out of every 100 mistakes made by investors 99 of them are a result of emotional decisions.
If you learned how to control your emotions and how to have self discipline your chances of making money from stocks will become very high and you will be very likely to be a successful investor.
The herd behavior is the act of following the crowd by doing whatever they are doing even if you don't have enough information about the stock you are going to buy.
A study has found that people are more likley to follow others if they were unsure what to do. This possibility increases with the number of people doing the activity.
In other words if more than one person took the same decision then a bystander might follow them even if he was not sure of the outcome of that decision.
Humans get encouraged when they see other humans doing a certain task and as a result they get motivated to follow them.
Some people rush into buying just because everyone around them is buying and some run to selling just because everyone around them is selling.
What’s Ironic is that the majority of the investors fail to beat the market index and most of them fail to protect their money from losses but still people follow each other blindly.
Usually when everyone sells his stocks because of fear the market reaches very attractive valuations that allows investors who buy at that time and make good profits.
On the other hand when everyone buys stocks as a result of excessive optimism the stock market becomes overvalued and major investment institutes start to exit their positions thus causing major losses to those who bought stocks at these expensive prices.
In the investment world, There are two main reasons for believing in others more than believing in yourself which are lack of self discipline and lack of knowledge.
Lack of self discipline will let you follow your emotions without being able to control yourself while lack of knowledge about that specific stock might let you buy it without knowing anything about its bad financial position.
If you want to protect yourself from getting involved in herd behavior then do your homework by researching stocks well before you buy them and by developing self discipline.
Only then you will be able to control yourself when others lose control of their emotions. One final thing, if you found that everyone’s net gains are positive then forget about this article and follow them but what you are going to discover is that most of the people you are following are either losing money or not making good profits.
Farouk is not only holding several degrees in psychology but he is also an MBA holder, a stock market investor and an entrepreneur. The information you are reading now can dramatically increase your chance of increasing your wealth and becoming reach. If you have any doubts regarding these statements then read what other visitors say about 2knowmyself.com.The book How I did it was written by Farouk and it explains how he managed to make a website that generates thousands of dollars/month in less than 2 years without paying a penny.
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