There are also market participants who have the opposite problem: they pay less attention to the various economic reports are released daily, so they lost a lot of market opportunity in front of the eye. Exchange rate or the value of the stock ticker symbol is not just a blink of an electronic screen or monitor, the value of stock / currency is an actual ownership interest in the business, and businesses that have a fundamental value that does not depend on the price of the stock / currency.
Minimal effort to look at opportunities in the market will result in the risk of losing a client who ran the company that owns the data better. By demonstrating a better understanding of the market as a whole with the contrast can encourage your client's buying decision courage and will produce an image of service to the fullest. How can a trader or a company get better information to make smart decisions and profit? They should join forces in the intellectual and reasoning and extensive experience.
Technically, the principles are suitable to be applied to virtually all capital market and money market is that a trader should be through action, through thorough analysis, promises safety of principal and to return funds (profit / return) is adequate. Comprehensive overview of the action right investments consist of three elements:
- You have to analyze a company / country as a whole, as well as whether or not the solid business foundation, before you buy a stock / currency,
- You must take action to protect yourself from large losses,
- You must set a target to achieve a decent performance, rather than exceptional.
There is evidence that a high IQ and higher education is not enough to make an investor to be clever. In 1998, Long Term Capital Management (LTCM), a hedge fund run by an army of mathematicians, computer scientists, and two economists Nobel prize winner, lost more than $ 2 billion in a matter of weeks in a big gamble that the bond market will return to normal . But the bond market more and more abnormal and LTCM had borrowed so much money that his fall is almost overturned the global financial system. Back to the Spring of 1720, Sir Isaac Newton South Sea Company shares, the most hot stocks in the UK.
One look at the symptoms of the market getting out of hand, the great physicist muttered that he could calculate the motions of objects in the sky, but he could not calculate the madness of people. Newton took off his South Sea shares pocketing 100% profit of £ 7,000. However, only a few months later, the market drifted tremendous enthusiasm, Newton plunge back into the market when prices are much higher, and even loss of £ 20,000 (or more than $ 3 million in today's money). Until the end of his life, he forbade anyone to mention the word South Sea nearby. In short, if you fail to invest that much, not because you are stupid. That's because, as Sir Isaac Newton, you have not developed the emotional discipline it takes to be successful investing.
Foundation you need to increase your intelligence is to rein in your emotions and refuse to follow the level of market madness. To be a smart investor is more a matter of character rather than the brain. We can use the metaphor of Mr. Market to explain how stock prices may be either (mispriced). Mr. Market is sometimes crazy relapse is not always judge a stock / currency in the same manner as Appraiser (estimating) the price with actual values. Instead, when the stock goes up, he happily bought at a price higher than the objective value, and when the price declines, he hastens to throw it at a price lower than the true value. Does Mr. Market is still there? whether he is still a split personality? On 18 September 2007, Mr. Market screamed with delight, the Fed cut rates by 50 basis points from 5.25% to 4.75%, so the Dow Jones index has increased phenomenally through the highest point on the 11 october 2007, with an increase like that would have seemed much more higher price.
However in the romance glowing with the Dow Jones Mr. Market escaped notice one thing in this business conditions. Large financial firms have lost so much money $ 400bn, related to the case of defaulted mortgages (subprime mortgage), the history of the company, paper asset downgrade thousands of them, so the dow jones index, a broad measure of the performance of U.S. stocks is not really a profit during 2007. Later, Mr. Market to meet the sudden collapse is very scary, just four months after breaking a record high of 14.246 shares of Dow Jones closed at a price of 11.588. Is the Dow Jones business has dried? Absolutely not; Mr. Market had no better reason than the joy in his anger. So what changed? Only Mr. Market mood.
Would you let someone who has been declared insane by the medical and law come to you at least five times a week just to say that you should feel exactly how he feels? Will you be happy just because she was happy or feeling miserable just because he thinks you should be miserable? Of course not. You will defend your right to control your own emotional life, based on experience and your beliefs. Think for yourself rather than trail Mr. Market.
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