Here is a quick background of one of my past experiences with Fear-
A while back, when I first became a trader, I bought shares from a company called Chesapeake Energy (ticker symbol= 'CHK'). I bought a few shares at $34. (Back in Sept of '05.) I held my position for about a week. It was hard to check what was happening during the day because of school and sports. So really, all i had was an hour or so before the market closed to check up on it. I did have my stop orders in in case something were to happen. Basically, I wanted to see what really happened in the case of "buying stock." (Keep in mind, this was in my REAL Scottrade account.) I let it ride a few more days from the day i purchased the shares and it moved up and down a bit. Nothing to scare me. But when the stock bounced BELOW the price i bought it, Fear kicked in and I jumped to conclusions!
I immediately sold for market price which was $31.79. You're thinking, yea that's not a big loss at all! Now, i look back and realize the same thing, but it's those lessons you learn early on that make the big difference in the end. Add in my $7 commission, and it was a small deduction from my portfolio's total.
In the next few days CHK hits $37. I became slightly angry. It happens. That's one loss, BUT, lesson learned- DON'T JUMP TO CONCLUSIONS! Give the stock a chance. It will bounce up and down, but you must learn to work with it. As you learn the ropes of investing, you will start to realize other indicators that will inform you what the stocks patterns are.
On the other hand, Greed, is the total opposite idea of Fear. The stereo-type of investing is getting rich, or already being rich. To be honest, that's not close to being right. The market can either make ya or break ya. Greed seems to be the main reason people loose in the market. You get too anxious to "get rich quickly" and end up failing miserably. It will happen, again, to everyone.
A good example of this was a purchase I made of Lucent Tech (LU). I bought in, thinking yea, the technology sector looks good and strong. It was at the time, little did i know, being TOO over-confident would break me in the end. The stock did well for the first couple days, but then i started realizing something. The movement per day was a little upswing, then closing with a strong downtrend. I thought, "well, cheap stocks like this one can make me alot of money, esp how much it moves per day. I know this will turn around, just give it some time."
It killed me. I held on TOO long and was way over-confident with my decision. Again, you learn from your mistakes. But to be able to prosper in the long run, you must learn, and execute properly.
Don't get too drawn into a stock or stocks. Anything can happen! No one knows what the market will do. Therefore, take matters into your own hands and use your best judgement.
Summary of what to remember-
- Don't jump to conclusions.
- Give your stock a chance to do something. If the price falls a bit, know of an exit plan. You will make money, and you will lose money. It happens.
- Don't get too caught up in a stock. Anything can happen!
Good investing everyone!
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