My key points :
-Control your emotion
-Never panic sell or buy
-Take profit
-Research
In the time I’ve spent educating myself, practicing, and actually trading, I’ve realized that one of the most important factors in making good trades or investments is my ability to manage my own emotions.
There’s a field of finance called behavioral finance. It attempts to understand how human behavior affects markets. Though I don’t know much about the field itself, I’m convinced that the core concepts behind it — human behavior — are an important part of managing investments.
Anecdotally, I’ve seen how bad things can go when panic, fear, and greed start driving my investing decisions. And I’ve also seen how good things can be when I control those emotions and think clearly.
I’ll admit that this is one of the hardest things that people have to do. Loss aversion appears to be hard-wired into us. Losing something that we thought we had can cause pain and fear, and those emotions, combined with all of the other physiological effects that our bodies experience when going through loss, can cause us to do whatever we think we need to in order to minimize that loss immediately.
It’s clear to see how this comes into play in the world of investing. If we own an investment that suddenly starts going against us, it’s easy to see how we’d want to get out of it as soon as possible. On the flip side, it’s also easy to see how we might experience FOMO when we see an investment that we don’t own start to increase in value quickly. The emotions that stem from these situations may cause us to sell an investment too early or too late, or buy in to an investment at its peak.