Each time we face our fear, we gain strength, courage, and confidence in the doing.
Ralph Waldo Emerson Quotes
If you ever wanted to see a visual representation of the mass mindset, then the diagram below is probably the perfect pictorial depiction of the thoughts and emotions that run through a person’s mind during moments of euphoria and panic. When it comes to investing there is no place for emotions; in fact emotions are useless unless you are in a flight or fight situation. To invest in the market successfully you need to understand that you need to do exactly the opposite of what these useless emotions are prompting you to do.
Riches come to those who seek it and not chase it. To those who chase it, rags are the only reward. The oyster can be your world or you can be an oyster in the world. One needs to get a firm grip on their emotions if one wishes to be successful in the markets. There is simply no place for any extreme deviation from the norm when it comes to investing and euphoria and panic are extreme deviations from the norm.
1= The stock is doing nothing and going nowhere; it’s pure junk, let me look at something else.
2= Lucky break, it’s just a fake break out, it will crash and burn again. I am not going to waste time with this investment.
3= what, it’s still going up, earnings are not so good, long-term fundamentals still not great and the technical outlook is far from perfect. Let me sit this out, it’s going to pull back and crash.
4= I knew it was going to crash, thank God I did not buy. The mass mindset is focusing on the wrong point and does not recognize the opportunity at hand. Yes it pulled back, but a close look will show you that the pull back ended–miles away from its first break out. An imbecile or those with the gamblers mindset can only see the picture for what it is not, by replacing it with a picture from his or her imagination. Since they live in a losing sphere they focus on the negative aspects, but not on the positive aspects. In other words, they choose to focus on the illusory and not the real.
5= What happened here; this stock was supposed to crash, how the hell did it get here? Perhaps I should have bought, I could have made a lot of money; this looks like a sure thing. Only halfway through stage 5 will those with the mass mindset decide it’s safe to venture out. Now this person finally musters the courage to buy. Wow it actually went up, great, I’m making money.
6= This stock is going to go to the moon……….. This is a sure thing, let me tell all my friends about it.
7= What happened? it pulled back. Ahh, I am not going to fall for this like I fell for it last time (look at number 4). Time to buy more; buy on the dip, that’s it baby; buy baby buy, that’s the way to do it.
8= I knew it, it’s going up and I made more money, wish I had bought more. Next time I will invest more on the pull back. (Notice the loser’s mindset does not bother to take time to notice that the stock did not put in a new high. All that matters is that it went up.)
9= It’s going down again, time to really load up; I don’t want to miss this opportunity. Earnings are great so it must be a good time to buy some more. Let me back the truck up and load up.
10= First dose of bad news and the stock takes a big hit; okay, this is just temporary; it’s going to go back up. Blind faith is one of the biggest mistakes and one of the main ingredients of a losing mindset. Let me buy more and average down. Gamblers always think of averaging down and never think of averaging up.
11= Did I do the right thing. I should have sold when I was up. Maybe I should sell now and cut my losses. Things are definitely not looking so good. Hum, you know what, let me just hold for a bit longer. Maybe things will change. Yeah, things have to change; look how fast this stock went up and it has pulled back so much. The worst is over; it has to go up.
12= This stock is dead, I have to get out; it’s not going anywhere (this is when the stocks start to bottom. The secret programmed desire to lose syndrome has completed its mission. Trader is in state of extreme distress and shell-shocked. I am never going to look at this stock again; I knew it was garbage, why did I ever buy it in the first place?
13) Slow base formations and the possible start of new uptrend and the worst part is that this trader is out.
The masses never learn, they will always be used as cannon fodder as that is the role they secretly wish for. Remember the saying “misery loves company, but stupidity simply adores it” ……… The masses always dump when they should be buying and buy when they should be selling. In this world, it’s not what you know that can hurt you, it’s what you think you know but what you don’t know that can hurt you the most.
The two most powerful warriors are patience and time.
Leo Nikolaevich Tolstoy Quotes