Stock Market Education How To Win The stock Market Game

Stock market education: Focus On The Trend

Updated March 2023

The early bird gets the worm; the late bird the bullet. Sol Palha 

We covered this topic several years ago but used a chart of the now-defunct company CMGI.   Hence, we decided to come out with this new update.  In this example, we will use the NASDAQ. The chart below is a graphic representation of the thought process that the average investors experience when trying to get into any investment. The same concept applies to any stock, index or market.  Hence GOOG, AAPL, WMT IBM, NTES, SOHU, MSFT, etc., are all bound by the same rules.

Most investors jump into the markets without taking the time to do any legwork. They assume they are ready to take on the stock market by reading a few books, listening to the talking heads on CNBC and following a few so-called experts.  The market is a mighty beast with a more than 90% win ratio. Only 10% of investors can consistently claim to walk away with gains.

Stock market education Tip 2: Get a grip on your emotions 

It is a lamentable truth that the ordinary individual, regardless of their background, is all too often the victim of the harsh realities of investing. This is due, in no small part, to their tendency to act before they think. Alas, it seems that emotions drive their decision-making process, an unfortunate circumstance that is utterly incompatible with the rational world of investing.

As one might expect, those who allow their emotions to guide their investments are doomed to suffer financial ruin. Therefore, it is imperative that we cast aside our emotions and banish them from our minds. In the realm of investing, emotions are an unwelcome distraction, a hindrance that must be eliminated without hesitation.

 

 The Solution Is Simple 

The answer to this conundrum is deceptively simple, yet its simplicity belies its true difficulty. As we have previously established, emotions are the enemy of the discerning investor, and they must be dispatched without hesitation. The maxim “shoot first, ask questions later” seems fitting in this instance, as emotions are simply not welcome at the table of investment. Success in this realm demands that we take an opposing stance to the irrational whims of our emotions. Any deviation from the norm is a danger that must be avoided at all costs, for euphoria and panic are such deviations that can lead one astray.

Remember, my dear friend, that the path to success in the world of investing requires discipline and rationality. Emotions are fleeting distractions that must be vanquished if we are to achieve our goals.

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The cycle of pain

• This stock is going nowhere; it is hardly moving, and the fundamentals are weak.
• Pure luck, the fools who jumped in will regret it. This is a false breakout. This stock is going to drop to new lows.
• Holy smokes, the stock is still going up. Earnings are terrible, long-term fundamentals are not great, and the technical outlook is far from perfect.
• Thank goodness I did not buy; I knew it would crash. Instead of focusing on the fact that the stock is letting out some steam and building momentum for the next leg up, the mass mindset sees only what it wants to see.
• Wait a minute, what’s going on here? The market was supposed to crash. Maybe I made a mistake in not buying.
• I was smart to wait until things improved before getting in; it looks like the markets will take off.
• What is going on; why is the market dropping? It’s only a pullback; I am not going to fall for this game again.
• There you go; I knew it was going to turn around. I should have put more into the market.
• It’s going down again. Opportunity is knocking, and it’s time to load up.
• The market is hit with a dose of bad news and pulls back very strongly.
• If you panic now, fear will take hold.
• Damn it; the market is dead. I am getting the hell out of the stock market.
• The market is going through a slow bottoming phase. Once this phase ends, a new uptrend will begin.

Stock market education Tip 3. How To Win

“Misery loves company, but stupidity simply demands it.” Sol Palha 

In the world of investing, it is important to remain rational and analytical instead of letting emotions guide your decisions. Emotions such as fear and greed can cause investors to make irrational decisions, which can result in significant losses.

Perceptions and assumptions play a significant role in how we interpret information and make decisions, and emotions can often cloud our perceptions. Therefore, it is essential to learn how to control your emotions to become a successful investor.

Trying to time the exact top or bottom of a market is often a futile exercise, and it is better to focus on identifying the subtle signs that indicate when the market is topping or bottoming. Once you have identified these signs, you can open a position that reflects your analysis, even if it is not in sync with the masses.

Ultimately, successful investing requires a level of detachment and the ability to make rational decisions in the face of emotional turmoil. Investors can increase their chances of success in the markets by focusing on the facts, keeping emotions in check, and making decisions based on objective analysis.

The world can be your oyster, or you can be an oyster in the world.   Sol Palha

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Stock market learning; Focus on the Trend