Stock Markets are not Casino, Where you through few Bucks and Expect luckily to be Rich
Trading and Investing in the stock markets is a business. As a business you need to have a plan and follow it. You have to avoid wishful thinking. To be successful in the stock market, you must think and act like what the market think and act.
Anomalies of the market is that market losses are immediate and brutal and prices can be driven up or down beyond the expectations. Wishful thinking uncoupled with a healthy perception of reality.
Human being is prone to wishful thinking. This article is all about the manage the financial risk with avoiding the wishful thinking that eventually over-ride the practical rules of stop-loss and fail to understand the risk-reward ratio. All the trader must know where and when to get-out of trade, if they are wrong.
Once your enter in trade, there are some different stages (situations) comes up, that you have to face it. Here are the description of the stages that eventually come up with your trade, if trader is prone to wishful thinking.
First Stage, trader is bullish, he has bullish position with the market and market is going well as planned and trader have profitable position in the market. One day when market opens, market is still bullish but, trader’s position is unchanged, it did not perform as bullish market perform.
Most of the market player act more on fear and hope than they do on reality. Here, the trader’s market position was unchanged and failed to go up from the opening, the trader had his worst feeling of fear.
Second stage, As it turned out, prices dropped severely and touched the limit down. A trader hesitate to leave his original mind-set and bought more contract in refusal to accept to new changes of the market. Now, positive news are there, however the price does not did any positive performance.
Third Stage, trader thought wishfully, hoped against reality and prayed for the miracle. Now, market has a sentiment of bearish, one by one every trader was selling out their long positions and market slides further like hot knife through butter. Finally, sleepless nights begun and he has to cut his position eroding big portion of his capital.
The whimsical thoughts and revenging the stock market by holding position tight can end up trading and investing career.
Markets have their own logic and you must be able to evaluate, what market is trying to tell you. The first consideration is either your equity appreciating or eroding? If market do not supports your trade, you can not stay with a position that is eroding your equity. Take your losses and figure out it later for whatever reasons, your market analysis was wrong.
There are different opinions for the stock market for it’s being a casino or not, but personally I believe that it’s depend on you. How you behave with your money in stock market decides whether stock market is casino or not. I have some references articles regarding this :-
- The Stock Market is Not a Casino
- HOW BROKERS BECAME BOOKIES: THE INSIDIOUS TRANSFORMATION OF MARKETS INTO CASINOS
- Stock market is like a casino: Investors
