Buffett has a classic quote in our investment and trading community: I am greedy when others are fearful, and I am fearful when others are greedy?
So when should we be greedy and when should we be fearful?
In the actual trading process, we often encounter such investment dilemmas. Today my orders made some profits, but I was afraid of profit loss, so I took the profits and ran. As a result, the market went a long way afterwards, and I made a lot less money. Another day's orders also made profits, but this time I insisted on not taking the initiative to take profits, and insisted on holding on to let the profits run, wanting to make more money. As a result, the market reversed and the profits were gone. At this time, we will shout: Greed harmed me, and the weakness of human nature is greed.
In the investment and trading fields such as stocks, futures and foreign exchange, many traders will have the same problem. If we buy when the market price is relatively low, and when it rises to a relatively profitable position, the market begins to adjust, should we leave the market or hold on? At this time, there are often different opinions and everyone expresses their own views.
If the price rises again after leaving the market, people will often slap their thighs and say, "Oh, why was I so scared at that time"; if they do not leave the market and the price gets lower and lower during the process of holding on, people will often regret it and say, "Oh, I was too greedy. Why didn't I put such a high profit in my pocket?"
In fact, many retail investors and novices are often wise after the event. Even if they have the chance again, it is difficult for them to accurately judge when to be fearful and when to be greedy, and why, because people in the investment field are often nervous and find it difficult to make rational judgments.
During the trading process, many people are either too greedy or overly fearful, and end up investing in vain and playing with nothing. This is all caused by insufficient psychological control.
Many failed investors and traders have these four typical behaviors.
1. Turn and run, leave when you lose money.
2. Increase positions against the trend.
3. Blindly following the trend and chasing ups and downs without any rules.
4. Heavy position operation.
Among these four behaviors, the first two are due to fear. They are afraid of losing the money they earned, and at the same time, because of the fear of losses, once the price moves in the opposite direction, they are reluctant to close the position and admit the loss. Instead, they increase their positions against the trend with a fluke mentality, hoping that the trend can be reversed, but it often causes more losses. The latter two are due to human greed. When they see the price rising, they chase the rise, or when they see the price falling, they blindly follow up with heavy positions without a plan.
With this approach, you may get a few successful gains, but it is often just luck, and investors are likely to suffer heavy losses in the end.
If they have a trading system that conforms to the trading logic of positive profit expectations of "cut losses and let profits run", have clear trading rules for entry and exit and capital management, and strictly enforce these rules, then you will be able to overcome greed and fear well.
Everything in the world is evolving. From agricultural civilization to mechanical industry, and then to highly developed information civilization, human society has achieved leapfrog development, material life has become increasingly abundant, and science and technology have changed the world's technological evolution. Unfortunately, there is one thing in this world that does not evolve, and that is human nature.
But for individual individuals, human nature can evolve. For example, some professional trading experts have overcome the fear and greed inherent in human nature through continuous practice and reflection, and ultimately evolved their own human nature to become winners in the stock, futures and foreign exchange markets. However, most investment traders will never be able to overcome the weaknesses in their own human nature.
As a whole, human nature has not evolved for thousands of years. So in the process of overcoming our own human weaknesses, we can also think in reverse and use the greed control index analysis tool to analyze the general status of market investors and reduce our own market risks.
At all times, investors should respect the market, view market conditions rationally, overcome their own human weaknesses in a planned manner, and continuously improve and perfect their trading knowledge within a familiar and controllable range.
The full text is over. Since you have read this far, if you think it is good, please give it a like.
