Abstract of the article
- In the capital market, prices always move in the direction of the outcome of buyers and sellers.
- An unbiased view of the market leads analysts to more detailed analysis.
- In the capital market, prices are constantly changing and every investor can decide to buy, hold or sell his shares according to the amount of profit he envisions for himself.
- If the market trend is against the investor’s position, he must do something to stop the loss; Otherwise, it will become a loser.
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The market is always right
The existence of two traders who agree to trade on a price (this price may or may not be reasonable to others) forms the reality of the market. What we want and expect has no effect on the market trend; Unless our trading volume is so high that it can control the market. For someone who is watching the market from the outside, every trade that is done is a signal that is a sign of stabilization or movement of prices in a certain direction according to which he can define trading opportunities.
The movement of prices depends entirely on the two groups of suppliers and buyers, and the amount of fame, academic degree and social status do not create any rights for traders. Your opinion about the value and price of a share is very respectable, but regardless of the strength of your argument, prices always move in the direction that the outcome of those two groups is in that direction.
For example, if the share price falls below its historical price floor, it is completely meaningless to think that this should not have happened. Unless you personally prevent this price drop by buying a suitable volume at a higher price.
But keep in mind that some sellers must have believed that the current price is higher than their desired price; In such a way that they considered even this low price as an opportunity to sell, otherwise they would have no reason to sell. In general, you always have to choose between being right or making money; Because the market is never wrong and that’s the truth you see.
In the capital market, the potential for profit and loss is unlimited
If we want to compare the market with a betting race, we should say that in betting, you decide how much money to bet; Therefore, you can easily calculate your profit or loss limit, but in the capital market, you will never know how much profit or loss you are going to get from each transaction.
Psychologically, this feature allows you to start imagining that one day, in one transaction, all your financial wishes will be fulfilled; But if you put all your focus on this, little by little you will only begin to collect information that confirms your desire, and as a result, you will keep your eyes on all the information that clearly tells you that you need to get out of the current situation. you close
◊ Be sure to read this article: Free stock market training from zero to one hundred
Many psychological factors affect how accurate your assessment of the market’s potential movement is. One of them is that you should free yourself from the illusion that you are going to achieve your dreams quickly by doing one or more transactions and try to have an unbiased view of the market. If you are going to continue this illusion, you should know that you will soon run out of money.
Prices are constantly moving
Markets are always moving and always involve 3 decisions: buy, sell or hold. Which of these decisions traders make depends entirely on the answer to the question: “How much profit is enough?” But is there a limit to the amount of profit? The nature of greed originates from this question. If you are in a profitable trade, you are always looking for more profit and if your trade causes a loss, you will not accept it and you always convince yourself that you have not lost, hoping to make a profit.
With this in mind, it is easy to understand why for most traders, entering a trade is much easier than exiting it. Also, according to successful traders, you should trade money that you can afford to lose and that money has little value in your life. Finally, the market is a dangerous battlefield, and in order to be successful in it, you must learn to let the market tell you what it will do and, in fact, let it determine how much is “enough.” Is.
Of course, your thought system will operate completely independently of the market regarding concepts such as loss, error, greed, and revenge, and this will make learning a bit difficult. You may ask where does the feeling of revenge come from? We must say that if you cannot accept the responsibility of your loss, you will look for the culprit. Here the market is to blame for you because it took more than you were willing to lose.
There is a sense of revenge here. Assuming that you lost 20% in the previous trade, now the market offers you a trade with 10% profit; But you reject it with a vengeance, and you won’t settle for a trade with less than 20% profit, even though the market is clearly telling you that there is no more stretch. The more you try to reduce the negative effects of your beliefs about greed and taking revenge on the market, the more you will allow the market to make decisions.
Make a decision and do something
One of the most important and common consequences of not knowing the starting and ending point of the market is that it can turn the trader into a passive loser. In the betting game, the game starts according to specific regulations and with an exact amount at a specific time and ends at a specific time, and the maximum profit or loss of each person is the same agreed amount.
To start a new game, each person decides to risk losing again and knowingly bets a new amount; Therefore, for more potential losses, he must actively participate in the game, and if he decides not to play anymore, the losses will stop and his assets will no longer be subject to reduction. But in the market, the situation is different.
◊ Also read this article: Investing with little money
You can easily be a passive loser here. That is, if the market trend is against your position, you have to do something to stop the loss, but if you don’t want to or can’t do something, your bank account will be empty day by day and in fact, you will be a loser without doing anything.