TRADING DISORDERS - STOCKMARKETS

STOCK MARKET-TRADING AS A PROFESSION:

Professional experts consider " STOCK Trading" is an effective tool to make money on the volatility but amateur retail TRADERS get caught on the wrong foot due to emotional imbalance and lack of understanding of the "Game Plan" involved.

The Online Trading opened many windows of opportunities to retail investors. Many traders prefer Day trading in stock markets as a profession because of the underlying opportunity to make money is huge. The online screens exhibit the trades with rise and fall of the prices in ticker and the colors that stimulate emotions to Buy or Sell instantly to grab the opportunity. The emotional "Greed and Fear" attached to the position when built, generate anxiety and turbulence in the mind and get confused to take right decisions at the right time.

COMMON TRADING DISORDERS:

The Institutional and professional investors wait for the right time to go for shopping in stock markets whose investment research enhances better decision-making process with RIGHT perspective in STOCKS that can do well in future, improve their balance sheets at revenue front & profits part and market capitalization. The Investment decisions in stock markets considered both on Scientific research and Art part is recognizing the “TIME to INVEST”. They have the holding capacity as well loss-bearing capacity and may sometimes write off the loss and search afresh in other stocks.

RETAIL TRADER CHALLENGES:

I)Revenge Trading:

Revenge Trading is a very common practice and done to make money from that counter/scrip. The force of revenge gets generated in the mind as a consequence to the loss incurred due to hasty decisions made in the market volatility. The trader gets emotional rage to the foolish position made and a humiliating failure to enjoy profits triggers retaliation. Many losers as traders do trade with induced insults met and previous wounds stored, strike back with vengeance, also addicted to trade with vigor to prove that they are right and worthy.

The traumatic losing deals are painful and hard to digest. The failure to take right decision bug the mind, pressure build beneath the layers over a period of time. The frustrated mind call for a revenge and retaliation to cover losses from that stock triggers Revenge Trading (study the “Rouge Trader”, a true story of Nick Leeson).

The human Psychology Research Institutes state that the pre-frontal cortex the amygdala responsible for emotional reactions controls the decisions that the trader makes when encountered with an emotional reaction and also regulates the anxiety that shoots up once substantial positions are taken up.

II)Coercive Trading:

Coercive Trader with animal instincts, rule the mind and heart with EGO-centric approach become blind to accept reality, do trade with little reasoning. These traders ignore the warnings, think little on what is being done at the trading, blindly build positions and their ultimate consequences are well known to many.

Most of the times, many traders who lost their control over their positions “pray for the wish” to happen and keep on buying when the price is falling and keep on selling when the prices are rising with coercive nature and argumentative mind. Any size of position against the major trend is a drop in the ocean and simply trying to demand the ticker to do the opposite never happens, seldom prayers get respected those who ignored “The Reality”. This kind of approach even ruined Jesse Livermore (the greatest trader, read the book “ The Reminiscences of a Stock Operator”)

Emotional Compulsive Trading:

Stock trading is a dangerous game for Traders with high emotional attitude get attracted to the magic of Ticker, can become a prey to the market operators. Emotionally disturbed trader lack the situational judgmental mindset, is a Noise Trader (the term first used by Fisher Black in 1986) who is also known a Idiot Trader whose decisions to buy and sell are irrational, confusing, erratic and become a compulsive trader to keep on punching BUY or SELL, doesn’t consider the direction but involves in push and pull off the volume into the system. Needless to mention the results of these traders, may not survive in trading for a long time.

UNDERSTAND GREED AND FEAR:

Professional/seasoned traders get the gut feel, place entry and exit points with a well-defined plan in tune with markets movements. The small-time retail players make their decisions based on some advice, find difficult to deal deep-rooted greed to make instant money in the volatility and fear of further loss influence their decisions but not the rationale, end up winding the capital base. These traders get success less than 5 percent but more than 90% get addicted, continue to create problems to their accounts.

Catch a ROPE:

Result Oriented Planned Efforts-ROPE for better returns as a principle for investing, a well-thought strategy. Market participants unanimously agree that TIMING the bottoms and highs in Stock-Market, a very difficult task anybody can ever achieve. So Institutional investors find their Buying Zones and Selling Zones, instead merely focus on exact right Bottom to BUY and Right High to SELL, whereas retail investors get tempted to CATCH the opposite side for quick bucks, end up in losing wealth.

CONCLUSION: Stock trading is a big opportunity to make money. By the way, understand trading disorders, risks, traps and emotions involved to manage success in stock markets.

A planned approach helps to garner the opportunity and wealth can be created as well.