Psychology for dummies
The most significant dynamic force that drives the markets is emotions. Psychology is the study of emotions and mass psychology is the study of the masses. This is why we put this section together. The stocks for dummies part focusses on the KISS principle; Keep it simple stupid. Our, focus is on teaching individuals, how to use Crowd Psychology to their advantage.
Emotions drive the markets
Contrary to what most expert’s state it’s the masses that drive the markets, and the masses decisions are all inspired by emotion. Therefore if you identify the emotion that’s driving the masses, you can initially put the principles of contrarian investing into play. However, instead of bailing out when things start to heat up, the laws of mass psychology are utilised. Mass psychology states that you only abandon and investment when the masses are frothing with joy and vice versa
Stock Market Investing & Technical Analysis
Once you understand the principles of Mass Psychology, you can further refine your skills by mastering the art of Technical Analysis. Technical analysis helps one identify when a market is trading in the extraordinarily overbought and oversold conditions. Don’t confuse market topping or bottoming action with trying to determine the exact turning point. Those attempting to determine the precise bottom or top are fools who seem to have an inordinate appetite for pain and misery. It’s like catching a falling dagger; if you succeed your hands will be far from happy. The most important factor should be to identify the trend; once you know the direction the rest is easy.
Stocks for Dummies 101: Slow and sure wins the race
Translation, if you dream about it you are not in so you will gain nothing. If you hesitate you will miss the boat and like most people, you will end up jumping in when you should be jumping out. The best time to buy is when the masses are panicking and vice versa
Don’t rush into the markets without taking the time to find out what your investment goals are and what type of trader you are. Remember the story of the tortoise and the hare; the hare took off and appeared to have won the race. He was so cocky that he decided he could take a nap and would still win the race, but the tortoise ploughed on slow and steady and ended up winning the race.
One mistake investors make is to rush out and invest in options or penny stocks. First focus on strong companies with strong quarterly earnings growth rates. When you have made some profit, use a portion of these funds to invest in options or penny stocks.
The early bird gets the worm the late one the bullet
If it were so easy to make money buying penny stocks or options, everyone would be doing it, and everyone would be rich. The reality is that 90% of players that invest in options and penny stocks lose their money. Investing for Dummies rule 1, you have to some skin in the game but you should know when to jump in and when to sit out.
Hesitation and fear will almost always ensure that you arrive at the party late. It’s better to get in early go through a bit of pain then wait too long and miss the entire ride. However, use the principles of mass psychology and technical analysis before opening a position in any stock. Remember the best time to buy stocks is when the masses are panicking and the best time to sell them is when they are euphoric.
Stocks For Dummies: Great investment quotes
- “An investment in knowledge pays the best interest.” – Benjamin Franklin
- “Bottoms in the investment world don’t end with four-year lows; they end with 10- or 15-year lows.” – Jim Rogers
- “I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful.” – Warren Buffett
- “The stock market is filled with individuals who know the price of everything, but the value of nothing.” – Phillip Fisher
- “In investing, what is comfortable is rarely profitable.” – Robert Arnott
- “How many millionaires do you know who have become wealthy by investing in savings accounts? I rest my case.” – Robert G. Allen
- “Invest in yourself. Your career is the engine of your wealth.” – Paul Clitheroe
- “Every once in a while, the market does something so stupid it takes your breath away.” – Jim Cramer
- “The individual investor should act consistently as an investor and not as a speculator.” – Ben Graham
- “It’s not how much money you make, but how much money you keep, how hard it works for you, and how many generations you keep it for.” – Robert Kiyosaki
- “Know what you own, and know why you own it.” – Peter Lynch
Psychology for dummies Important Reminder: Paper trade First!!!!
We have dedicated a huge amount of time to put out the Investing for Dummies section, and we hope it helps shed some light on this topic. Understanding how the markets operate is not something that can be mastered over a short period but it does not take forever also. Remember, if it’s something useful it will take time to master and if it’s not it can be grasped overnight; stupidity does not need instructions it comes naturally to most humans.
Before you start trading with real money, our advice is to paper trade for a while. You will find out that there are things you can only learn from experience and not by simply reading a text. After paper, trading, you should start playing with small amounts of real money and then slowly increase the amount of money you commit to each trade.
Don’t feel like doing the work now
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Investing for dummies; Mass Psychology resources
Stocks for Dummies: Technical analysis and fundamental investment rules
Investing For Dummies Contrarian Resources
Dividend and Growth investing ideas
Closing thoughts on Psychology for Dummies
We can provide a guiding hand while you master the principles of investing. We have been analysing the markets for over 16 years and have managed to keep our subscribers on the right side of the markets throughout that period.
If you like a guiding hand while you slowly master this process, consider signing up for the market update. We focus on Crowd Psychology and utilise Key proprietary tools that we have spent decades developing. The most efficient of which is the Trend Indicator. What makes the market update service different? It comes down to our approach, we do not fixate only on issuing trades but also on helping the individual understand the markets and become a better trader.