Do you ever just feel like you are acting mindlessly or like you are going through the motions? Are you shocked that your emotional responses cause you to sell when you should have planned to wait a bit longer? Or do you enter a deal too quickly without first carefully formulating a trading strategy? It’s possible that you’re succumbing to a natural tendency to follow the pack. Although it could appear normal, if you aren’t entirely aware of what you’re doing, you might find yourself forfeiting profits.
Even the masses who invest in the markets occasionally appear to behave without thinking. Once more, there is safety in numbers, and the masses find solace in doing as the throng does. They look for affirmation and attempt to follow the crowd. For instance, it is typical to observe the general public responding hastily to news headlines. Regardless of the underlying fundamentals driving the broader trend, traders in large numbers start selling as soon as they hear that a company has missed an analyst’s prediction. People start buying when a stock is hyped up, even if it is just due to unsubstantiated rumours.
The disciplined trader adheres to a thorough trading strategy. Impulsive traders operate on the assumption that everything will work out as they go along. Trading automatically can work if you are a really experienced trader, but if you are a new trader, you risk making mistakes. You can succumb to regret, greed, hope, or terror. However, when you allow your emotions rule, you’ll often behave like the crowd, and when you trade like a mindless herd member, you’ll incur losses.