Also read the previous post (Part I): Market Psychology: Fear And Greed (Part I)
Also read the previous post (Part II): Market Psychology: Fear And Greed (Part II) Market Maker Psychology
In the previous two posts I've explained a lot about the psychology of the repetitive market, and the psychology of the dealer. And now you know why in the stock market the psychology of Fear and Greed will always be repeated, because in psychology there is a famous quote: People will tend to respond with the same emotions to the same problems. This also applies to the capital market, where a psychological reflection (the market responds to the same problem in the same way) the market is depicted in a stock price chart (chart). Fear and greed will always be repeated and the market will respond in the same way.
From the two posts Part I and Part II that I have explained, you and I will agree that market psychology can plunge us into big losses. Even in bullish market conditions, a trader without good planning can lose big. But the problem is, even though the cycle of emotions keeps repeating itself, it is not easy to beat fear and greed. Then how to solve it?
The answer is: TRADING PLAN and EMOTION CONTROL.
Creating and sticking to your trading plan is of utmost importance. Without a trading plan, you will find it difficult to manage your portfolio and capital management. Do not believe? Please read the next post: Creating a Trading Plan (Beginner - Expert) Part I. In essence, a trading plan makes your trading more regular and consistent. It is very important to establish discipline in your trading plan. Don't break your own rules. You can get consistent profit if you can adhere to your own trading plan.
Analyst recommendations. Trusting too much on the recommendations of analysts will make your trading plan even more chaotic, which in the end, believe it or not, will make you trapped in a state of fear and greed. Please read the post: How Accurate Are Analyst Recommendations?
Second, emotional control. Emotional control cannot be separated from your ability to carry out your trading plan. When you can execute a trading plan and be CONSISTENT with it, you will not be trapped in a state of fear and greed. Fear and greed in the capital market occurs because traders cannot control their emotions. Excessive emotions occur because they are easily tempted by fast rising stocks without good analysis.
In a bullish market condition, you should not be easily tempted to quickly buy stocks whose prices are rising fast. Moreover, if these stocks are outside your trading plan.
But sir, the price keeps going up. What is this moment for if you don't use it?
If you ask that question, I will answer: stocks in the capital market are bullish, there will be a lot going up, do you have to buy them all? If you buy all of them, your portfolio will swell, and your profit will not be maximized. You should be able to select a portfolio based on your analysis.
Likewise with market conditions that are bearish. Let's say because the market is bearish, your stock price goes down. Do you have to be scared to the point of breaking out in a cold sweat?
Of course not. Then how to overcome bear market conditions? CUT LOSS. If your stock price has fallen in accordance with your cut loss limit, cut loss immediately, don't panic and don't keep hoping. You don't have to be overwhelming when the market is bearish. When you cut loss, you have secured your capital. The next decision is to wait and see and see opportunities at low prices.
'Ah, this Mr Heze. Speak easy. Implementing it is difficult.
I admit that doing is not as easy as talking. I myself sometimes hesitate to adhere to some of my own trading plans, but like it or not I have to implement them. When I adhere to my trading plan, my losses are controlled and I can make consistent profits.
So, the way to beat the market conditions of fear and greed itself is to comply with your trading plan. By setting up take profit and adhering to cut loss limits. Have you read the post: Psychology Facts in the Stock Market? Of course, you also have to be able to read market conditions. What does it mean? This means that you must be able to conduct market analysis objectively and independently, which is not too dependent on the analyst.
Your success in breaking the repetitive cycle of emotional psychology depends on yourself, not on others, not on the market. The market won't care how much you profit, how much you lose.
