There is one large problem that every trader and investor has: emotions. When they first decide their entry point in the stock market, there is confidence and excitement of the possibilities of making money. It’s not only individual traders and investors. Looking at the patterns of the past few months shows the same issue. Economists and those who were analyzing the stock market had high confidence levels and were building the stock market.
Then there is the pullback. The confidence that was showing from everyone in the market turns to shock. The emotion that traders and investors go through then leads to anxiety, depression and anger. According to several psychological studies, a roller coaster emotional ride takes place with a full spectrum of emotions when the stocks are moving.
It is at these points when most of the mistakes are made in the market. Even seasoned investors and economists make the wrong decisions; predicting from emotion instead of logic. By thinking strategy and analysis, it takes out the emotions and allows traders and investors to identify with the stock market in a different way. The question is: how is it possible to predict completely on data with no value additions or emotions that every human naturally has?
If you want to win in the market, add in economy leading indicators. You will be able to analyze the points in the market that are trending either with an up or down turn. You will also be able to clearly see the patterns and what is occurring within the market. Your analysis may include data, patterns and the current moves in the market. However, it is the real – time data as well as the lagging indicators that leads to more emotions.
Instead of relying only on the past analytical information and real – time trends in the market, traders and investors should include economy leading indicators that predict what may happen. Mathematical formulas and pattern based indicators are able to provide insight to what would happen in the market. By looking at this perspective, you not only take emotion out of your analysis. You can see clearly what may happen and find the strategies that fit best with trends that are most likely going to occur in the market.
The human element of emotion is often conflicting with the decisions made in the stock market. If you want to re-identify your position without being attached, then using economy leading indicators is essential. This gives you the data, information and the logical trends that are predicted to happen in the market. By using certain approaches, you will easily be able to build a winning portfolio.
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