How did you overcome emotional spending in the stock market?

Question

"Emotional spending" denoting emotions such as Greed or Fear which could hinder one's gains in the stock market.

Answer 1

Discipline, discipline, discipline

Before anyone begins to invest/trade they should have a written sound trading/investment plan with rules that will not only help you but more importantly protect you, mostly from yourself.

Make yourself a list of rules for trading, stick to them regardless of what the market does, or what others tell you.  Here are some rules for you to consider

The first and primary rule should be never enter into a trade without knowing when and where you’re going to close the trade.

Never invest on emotions; feelings have no place in determining investments.

Only buy stocks with real sales and real earnings, does not apply to pennystocks since they are c**p shoots and are traded as fun things and not as investments.

Only consider buying stocks with each of the last three years' earnings up 25%+, return on equity of 17%+ and recent earnings and sales accelerating.

Avoid cheap stocks, buy only higher quality stocks selling $10 a share and higher.

Never buy if the firm is filing or in bankruptcy.

Learn how to use charts to see sound bases and exact buy points.

Stay with up trending stocks, never buy on down trends. This does mean “the trend is your friend”.

Always buy companies with new ideas, styles or products.  

Cut every loss when it’s 8% below your cost. Make no exceptions so you can always avoid huge, damaging losses. You can always average “up”..

Follow selling rules on when to sell and take profit on the way up.

Never average down

Always sell when management cuts sales or earnings forecasts

Buy when market indexes are in an uptrend. Reduce investments and raise cash when general market indexes show five or more days of volume distribution.

Pick companies with management ownership of stock.

Select stocks with increasing institutional sponsorship in recent quarters.

Current quarterly after-tax profit margins should be improving, near their peak and among the best in the stock's industry

Don’t buy because of dividends or P-E ratios.

Find out if the market currently favors big-cap or small-cap stocks

Good luck, with time and discipline you'll get there.

Answer 2

Easy.  Train yourself to look at things objectively.  Either you can or you can not train yourself to do so.  

Answer 3

A good trading plan takes the emotions out of decision making.  You can even put your limit buy and limit sell orders when the market is closed.  And the brokerage will execute your orders automatically without any emotions.

  

Answer 4

Try to look for systems that have small but consistent gains. As long as your winning trades outnumber your loseing trades, you should feel confident in your trades in the market. There are strategies out there with long periods of draw-down followed by strong gains. Those strategies can really eat up your confidence, because you will see so many losing trades in a row followed by several big gains.  

Answer 5

This is an excellent question because recognizing behavior patterns, and dealing (constructively) with them is the start to being productive with your investments.

The more objectivity you employ - research, goals, sell targets - the more you can aid in disciplining yourself to take the emotion out of it.  In other words, you need to decide in advance how much you're willing to make and call it a success (even if it continues to go up) and how much you're willing to lose before selling.  There are excellent guidelines for this in Investor's Business Daily - online and especially in the newspaper.  Start there, begin to recognize certain patterns that work for you (data and behaviorally) - then move forward.  

Best wishes to you in accomplishing your goals.

Answer 6

I think you never entirely do avoid all emotion.

But I do it by the numbers. Historical numbers, current numbers, I let the numbers guide me. BUT the market and other investors operate emotionally. So you need to be aware of their emotions as well as yours. Riding a bubble up is a good ride but having the emotional stability to get off the ride at the right time is where it is difficult. And the numbers alone will get you our too early. And maybe back in the market too early as well.

I agree with much, but not all of the previous post. I will average down but I will also reevaluate at that time too.

Good Luck.