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What has psychology got to do with investing?
- The well-known term “market psychology” refers to the mass opinion in the market place, as reflected in price changes upwards (bullish) or downwards (bearish).
- The market is made up of many investors, whose individual psychology plays a part in their decision-making.
The more often these decisions are made, (trading, as opposed to longer term investing) the higher the risk of psychological error.
The majority of traders break even, or lose most of their bank, within one year
Yet few people ever examine the role their own psychology plays in their investing or trading performance.
Why not? Because its easier to blame the markets, or the broker, to try a new indicator, or to buy a new system, than to admit that our own errors might be contributing to our lack of success. Even a mediocre system, operated well, will bring profits. Excess emotion and lack of discipline usually prevent this, bringing a disappointing result.
So why do many investors fail? There are basically three causes:
- Cognitive errors, e.g false beliefs about one’s skill, or the nature of probability…
- Money-management errors, e.g not understanding the nature of risk and return…
- Emotional errors, e.g. fear, excitement…
The good news is, these errors can be corrected
Procoach uses cutting-edge technologies to help identify and correct these errors. We provide support, structure and skills to enable traders to reach their trading goals, and resolve difficulties more effectively.