Investing and the Fear of Regret and Greed

People tend to feel sorrow and grief after having made an error in judgement.

Investors deciding whether to sell or buy a security are typically emotionally affected by whether the security was bought or sold for more or less than the current price.

One theory is that investors avoid selling stocks that are going down, in order to avoid the fear, pain and regret of having made a bad investment. On the other hand, they also avoid selling when prices are going up, because they are very greedy and are afraid that the price will keep on going up.

Many people are wondering why they didn't take their i.e. 100% or 200% gains when they had the chance. Most investors will rationalize they ran these high gains down because they were afraid they would lose even higher profits. In my opinion, for many of these investors, it was just plain greed that prevented them from selling their stocks.

Every experienced trader knows that fear and greed are two emotions that can dramatically affect your success in the market.

You have to deal with controlling greed and fear every single day. Although there are no easy answers when it comes to the stock market, of one thing I am certain:

If you are a greedy trader and always try to squeeze every last point out of every trade, it's only a matter of time before you end up with a lot less than you actually started with!.

Oliver Velez of www.Pristine.com says that greed is "that little monster that resides in every single individual." Part of our success in the market, he says, is learning when to give this little monster a little bit more room to operate and when to curtail its actions. "Every single event has two ultimate outcomes--either a win or a loss," says Velez. "Greed can make you gaze at the stars without having any consideration of the rocks below. It can prevent you from considering the fact that there is a downside and establishing a stop loss, or developing a systematic way of exiting or aborting a trade if in fact things don't work out."

The embarrassment of having to report the loss to others may also contribute to the tendency not to sell losing or gaining investments.

Some researchers theorize that investors follow the crowd and conventional wisdom to avoid the possibility of feeling regret in the event that their decisions prove to be incorrect.

Many investors find it easier to buy a popular stock and rationalize it going down since everyone else owned it and thought so highly of it.

Copyright © 2005 I.E.C. Haramis haramis@greekshares.com http://www.greekshares.com

Ioannis - Evangelos (Akis) C. Haramis was born in Greece in 1951 and he studied in Greece, USA and in Belgium. He has been active in the stock markets since 1972. Since 2002 he is New Business Development Managing Director at an Investment Bank and the publisher of GreekShares.com

---

Time is Money and We Are Running Out of Both!

One of the fundamental principles of finance is the concept... Read More

Powerful Options Basics Lessons Improving your trading in 180 days.

An option is a traded security that is a derivative... Read More

How to Calculate the Value of Your U.S. Savings Bonds

If you're like many Americans over the age of 55,... Read More

Understanding The Real Rate of Return!

There is one indicator more than any other which determines... Read More

Sitcom Investing

A fickle stock market encourages good-humored mockery.Recently, as I watched... Read More

Investor Guide to Financial Health

Step 1: Spend less than you earnPerhaps the simplest financial... Read More

Bad News - Why The Financial News Media Can Cost You Money!

The communication innovations we have around us today like the... Read More

Gold and Silver Maple Leafs Get New Packaging

Gold Maple Leafs and Silver Maple Leafs are receiving packaging... Read More

Your Worst Enemy To Successful Investing - The Media

How do you make your investment decisions and where do... Read More

Online Trading Options Strategies - Rolling

Rolling is defined in options online trading as moving a... Read More

Trading Expert Discovers Ways To Beat Stock Market Odds With Money Management

The first point to mastering money management is that you... Read More

Can Your Annuity Do This?

Okay, so I can tell you I have sat in... Read More

The Realities Of Market Timing

Market timing systems are based on patterns of activity in... Read More

New U.S. Mint Coins a Golden Opportunity

In April, the U.S. Mint revealed plans to strike in... Read More

Why Should I Use Penny Shares to Build Wealth?

A strategic question. Why indeed?1. A penny share would usually... Read More

Creating Momentum with Options - Pro and Cons of At-the-money, In-the-money, and Out-of-the-money

To create momentum in your options trading you need to... Read More

Maniac Investment

Let's first understand what maniac means. According to Webster a... Read More

Reading Between The Lines In Annual Proxy Statements

Upper Saddle River, N.J. - May 11, 2005 - Now... Read More

Economic Survival in the 21st Century - the Three Key Questions to Ask

In this "special report", I want to pose a few... Read More

Critical Options Investing Tip When Trading Naked Calls and Puts

An option is a derivative trading product that is best... Read More

How to Terror-Proof Your Money

"To drift is to be in hell, to be in... Read More

Creating Wealth by Gearing Up

Gearing is where you borrow money to invest. As already... Read More

Success Trading: More Basic Terminology for New Traders

One important aspect of trading the markets is to understand... Read More

The 8 Biggest Mistakes When Designing Portfolios - and How To Avoid Them

Are you as good an investor as you think? Do... Read More

Trend Following

Trend following also called momentum trading is the simplest and... Read More

Investing In Sons Business Could Cause A Real Family Feud

Q: My youngest son wants to borrow $5,000 to start... Read More

Expand Your Pool of Investors for Your Company

If you own a company that sells complicated products and... Read More

Who Wants To Be A Millionaire?

I am sure you have probably read about the power... Read More

Options Made Easy and Investor Education - Simple Enough for a 10 yr Old Kid

How many of you out there think that the market... Read More

Learn How to Lose and Risk Management

One of the leading traders on Chicago Mercantile Exchange, because... Read More

Investing in New Zealand - Learn how to Find Unique Investment Opportunities

Investing in New Zealand might be much easier than investing... Read More

Just what is Arbitrage Investment?

In the simplest of terms, Arbitrage means to exploit price... Read More

Investing In or Owning Drug Lab Properties

Clean Up (includes the insides and the outside of a... Read More