As from April 2013 my Journey in Investing is to create Retirement Income for Life till 85 years old in 2041 for two persons over market cycles of Bull and Bear.

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This blog is authored by an old multi-bagger blue chips stock picker uncle from HDB heartland!

"The market is not your mother. It consists of tough men and women who look for ways to take money away from you instead of pouring milk into your mouth." - Dr. Alexander Elder

"For the things we have to learn before we can do them, we learn by doing them." - Aristotle

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Wednesday, 25 November 2009

Greed And Fear - Part 5

In  “Trading in the Zone”, Douglas wrote that all trading errors due to Fears.

Four Primary Fears:

1. The fear of being wrong.
2. The fear of losing money.
3. The fear of missing out (on the trade and profits).
4. The fear of leaving money on the table, or giving back open profits.

These fears lead traders to second-guess their trading rules and strategies. They might buy too early as they were afraid  that the market was going to run away without them. And they might sell too soon as they were so worry that the market would snatch their profit, and not waiting for the trade to develop and to hit their set target.

The solution?

1. Have a  system.
2. Have a clear set of rules for entering and exiting trades.
3. Follow your rules!

Have faith in your system and faith in your rules. If your system is a good one you will make money.

So you must follow the rules of your system, instead of reacting to your emotions when deciding whether to enter or exit a trade.

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