Online Stock Market Investing Not For The Weak

With online stock market investment decisions being made and executed at the click of a mouse, many negative online stock market investing traits can be magnified. This can be detrimental to the value of the investment as well as the health of the online investor. Individuals with weak control over their emotions generally do not do well in online stock market investment.

Dealing with your Emotions when Online Stock Market Investing

Investing wisely for the individual is all about dealing with emotions and reactions. One of the major reasons while mutual funds perform consistently (although without the peaks of riskier investments) is that this type of investment is bound by objective rules that guide mutual fund managers. A collection of individual investors will have a much wider range of investment performances mainly due to the fact that individuals react differently to volatile markets and economic news, especially when the news is bad. Whether you like to admit it or not, you are not likely a rational investor. Research proves that investors often make investment decisions that are contrary to their investment goals. There is often herd mentality when it comes to individual online stock investment. You might have had that experience for example when financial stocks are widely reported to be doing well, you will likely jump on the success wagon and buy shares. More object analysis through charting might actually suggest that it's a good time to sell that stock and look for better long term grow opportunities in other industries.

Fear and Greed

Experts often group our irrational actions around two words: fear and greed. Fear can be based around regret. Decision paralysis can prevent you from selling a stock when objective analysis suggests you should sell. The fear of regret i.e. that it could be a mistake if you sell now can lead you to holding on your stock too long and missing out on cashing in on a good price as well as moving to a better stock. Stock markets are inherently volatile in the short term as investors react to new and information constantly. This can spook many individual investors as they fear that a short term drop in stock prices equates to long term losses. In general, well managed companies with good track records will appreciate in value over the long run. Short term shocks become insignificant in the long run. Fear has other consequences like causing denial. Fear can cause denial by blinding the online investor to problems with their investment choices. They become subjective and refuse to take corrective action that is suggested by objective measures.

Anchoring - investors can drop anchor if they are scared of short term volatility and look for subjective 'safe stock options'. This means they can lock themselves out of potentially attractive growth options as well as contradicting their own long term investing goals. Greed causes investors to 'ride' a stock for too long or invest blindly into one stock with too much money and without objective justification. Greed can also lead to or be compounded by overconfidence. Individual online investors who have had a bit of success can become complacent with their abilities and not keep up with research and stock due diligence. Instead of relying on tools and resources, they might trade stocks on instinct and past knowledge. This could be fatal if investors fail to acknowledge current or predicted environmental (economic/legal/competitive) forces which can lead their stocks to major decline.

Trading Tactics

Online stock investors use trading tactics that reflect their overall strategy. Conversely poor investors allow their tactics to affect their overall strategy. Take advantage of resources and tools including software which help you stay rational and keep to your overall strategy. This takes the emotions out of your online stock market investment experience. If you recognize some weakness in your investment makeup which can make you susceptible to fear and greed - do not despair. Just like a person can get stronger by pumping iron in a gym, you can overcome any personality weakness by training hard. Begin by reading up on investing psychology and identifying the specific possible weaknesses. Try virtual investing tools and resources and make an effort to stick to a rational and pre-planned strategy. If you find yourself succumbing to fear and greed, move back to your strategy and use rational tactics to trade. Once you get the hang of overcoming your weakness in trading on a virtual trading platform, you can start trading with real dollars. Start with a small trading account so that you can build up experience using your rational trading tactics. Investing wisely with objective tactics will benefit you financially and emotionally in the long run.

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