Handling Fear in Correction
To alleviate Fear of loss you can do following things.
1. Invest in only Debt free, Blue chips or Index ETF or Large Cap mutual funds.
2. Diversified portfolio can’t become zero.
3. Keep buying Good companies during SALE.
It causes cost averaging for long term investment.
4. Stop watching TV and reading Newspaper.
Please understand that information in mass media is for masses. It’s exactly opposite of information of classes.
5. Stop tracking market daily
Another way to deal with Fear is To Expect Worse.
If you expect 9000 Nifty level then 10500 seems much palatable level.
Let me share a secret of market.
TOOLS don’t win the War.
MEN behind tools win the war.
If Robot or Computers could make money, then why would those companies sell services to others. They would have made money for themselves
How to handle Emotions in Volatile market?
If you want me the secret of all successful investors including warren Buffet, I would say it’s psychology rather than intelligence.
Hot stocks don’t give good returns.Most important is psychology of investors.
Let’s discuss Emotions involved in Investment.
Fear is essential emotion of human. However there is degree of variations amongst population. Some people are more fearful than others.
Schools and education create fear. Hence, most educated people are fearful.
Fear in share market
1. FOMO: Fear of missing opportunity.
2. Fear of Losing More
3. Fear of Losing Gain
Fear of missing opportunity compels person to enter at wrong time. Traders place market orders which gets filled at much higher price causing order Slippage loss.
Fear of losing more:
It happens when portfolio is Red. Investors are wary of losing more and they exit. As soon as retailers exit market turn around.
Fear of Losing gain:
It’s intolerable to Sit on Profit. Impatient traders want to book profit early.
How to reduce generalized fear?
2. Adventure sports
3. Conditioning of mind
4. Reading Bhagwad Gita. If you follow BG ,you can become fearless.
Your Generalised threshold of fear should be high.
How to tackle fear in market?
– Planned Entry and Exit
– Written plan
- Don’t read Messages during trading hours. You may get infected by fear of others
- Don’t take Leverage position
This is powerful emotion.
Many people enter in market due to their friends are earning too much. They get jealous and envious. They invest at wrong time and wrong stocks.
How to handle Envy?
– Alway tell yourself “Success is not overnight phenomenon. Your friends must have paid price for success. You shouldn’t get envious of it.
Never, trade because someone else is doing
Many times we hold stocks which are destined to doom.
E.g. Reliance Capital, DHFL,
We hope they will recover.
However, Always remember, IF promoter is running away from companies, retailers have no reason to hold it.
Chhotu had Pledged 95% shares in his companies. Means he has encased his shares and got money. He might be doing Short Selling of His own company.
Don’t keep Hope in Hopeless company
Many people deny that they are greedy.If trader buy leveraged position, he is greedy.
If you have 5 Lacs in your account and buying position of 30-40 Lacs ( 4-5 Lots of Future ),you are definitely greedy. You want to make money double in 6 months.
This is where retailers invite destruction.
Remedy: Make a rule that you will never use leverage more than 3X.
That means ,if you have 5 Lacs in account, maximum position of 15 Lacs.
Secondly, Greedy traders wait too long to book profit.
Use Technical analysis to book profit
When traders lose money. They are angry.
They want to take revenge and they want money back.
Anger is intensified if others are making profit.
Market takes everything from angry person.
Market is not right place to mess up.
Remedy: Never try to RECOVER losses.
Just play your game as natural, and forget past losses.
When opportunity is missed people regret a lot. Then they would enter at wrong time and wrong stock.
Tell yourself “Market is Eternal. There are lot of fishes in sea. Kuch na kuch mil hi jayega”
Managing emotions in market:
1. Writing Journal
2. Written record.. Write everything. Whoever is trading and not keeping record is a Gambler. Trading /investing is a business. And business can’t be done without record.
3. Meditation helps
4. Reading scriptures
5. Avoid overleverage
6. Avoid TV, Social Media if you are in losses
7. Avoid contact with Negative friends ( who always give bad news)
8. Conditioning of mind: Keep taking to yourself.
” I have nothing to lose. Even if I lose money, I will earn again”
9. Invest in Index ( Niftybees ) if you are afraid. 10. If you are Smokers, Chronic alcoholic, Bipolar Disorder, Mood Swings, don’t do day trading….