In the stock market controlling your emotions is one of the most important keys to being successful as a trader or as an investor.
There are so many ways your emotions can harm you.
They can ...
1.
Make You get out early Your emotions can make you get out of a good trade too early to actually hurt your chances of making a good return from it.
If you buy a stock at $50 and it goes up to $53 it is so tempting to get out of the trade and take the $3 profit, especially when you see the dollar amount associated with that.
But unless you were initially planning on getting out at $53 it can harm you and make you not realize your full profit from the trade.
Getting scared and taking a profit too early can significantly decrease your overall return.
2.
Make you hold on to losers Another way your emotions can harm you is by making you hold on to losing trades.
If you buy a stock and it falls down to your stop that's it, you're out.
There is no reason for you to stay in the trade it can only make your losses grow much larger then they need to be.
Yet many people will still try to justify staying in because they will find some reason why the stock is a good long term investment, even when they initially entered it as a short term trade.
3.
Make you enter too early There is a lot of hype out there about different stocks and different for sure investments.
But if the trade does not follow your rules there is no reason for you to be looking at it.
Even if you find a stock you like it is much better to wait for it to actually give you a buy signal before jumping into it.