Page 6 - Module 2_The_Human_Element

Module 2 -Lesson 1 – the human element

Fear in the stock markets is when investors avoid risk and seek safety in assets that do not yield high
returns (or yield any returns in some cases) but simply as a protection of one’s capital. The general
thinking here being that the investor is too afraid to invest their money for fear that they would end
up losing their capital rather than make any profits.

Greed in the stock markets on the other hand is when investors seek higher returns, thus taking on
higher risk. Here, the general conception is that investors are optimistic on the economy or the
general stock market and thus, willing to take on more risks.

3. dealing with psychological trading matters

Fear of being stopped out or fear of taking a loss:
The usual reason for this is that the trader fears failure and feels that he can’t take another loss. The
trader’s ego is at stake;

Getting out of trades too early:
Relieving anxiety by closing a position. Fear of position reversal and as a result, feeling let down.
Need for instant gratification;

Adding on to a losing position:
Unwilling to admit your trade is wrong and hoping that it will come back. Again, the ego is at stake;

Wishing and hoping:
Not wanting to take control or responsibility for the trade. Inability to accept the current market
situation;

Compulsive trading:
Drawn to the excitement of the markets. Presence of addiction and gambling issues. Needing to feel
you are in the game;

Excessive joy after a winning trade:
Relating your self-worth to the markets. Feeling unrealistically “in control” of the markets;

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