Whether stock traders choose it or not, they are simply emotional. When they enter this king of business, they all have the best intentions of making tons of money with only little risks.
However, some of them fall to recognize there are predictable repetitive stages. Today’s value of a company is easy to calculate. In stock trading though, you are trying to determine what the possible worth of the company is in the future and this is the very thing that drives the emotions of stock traders.
If you are planning to trade stocks, knowing the different stages of trading emotion will be a tremendous help to you. There are 14 stages in the trading emotion that seem to keep traders in an emotional roller coaster ride as they trade for stocks in the industry.
#1 Optimism – Everything starts with a positive outlook or a hunch that will lead traders into buying a stock.
#2 Excitement – Things start to move the way we want them to you feel giddy because of it. This is where we start hoping and anticipating that we are possibly making a success story in the stock trading world.
#3 Thrill – The market is continually going in the direction favorable to you. At this point, you are starting to feel that you are too smart. This is the stage where we are fully confident with the trading system that we have.
#4 Euphoria – This is the point where both the maximum financial risk and maximum financial gain are marked. As the investments you made start to turn to easy and quick profits, we simply ignore the risk’s basic concept. At this stage, we start trading at every opportunity we see with the aim of making bucks.
#5 Anxiety – The market starts to turn around. The market is starting to get back your hard-earned gains. However, this is new to us, we still believe with the trend we have seen before and still trade.
#6 Denial – We still think that the market simply does not turn as quickly as we hoped. There must be something wrong is what we keep on believing.
#7 Fear – Reality finally sets in and you now realize that you are not that smart after all. From being confident, you are now confused. We know that we should start getting out with a small profit but we just cannot bring ourselves to move on.
#8 Desperation – At this point, all of your gains are lost. Without knowing what to do, we attempt to do things that will leverage our position again.
#9 Panic – This is the most emotional stage as this is where we are hopeless and clueless. We feel like we lost control and now are left at the mercy of the market.
#10 Capitulation – This is where we reach our braking point and start selling our position for whatever price so as we can get out and lose no more.
#11 Despondency – After our exit, we now view the market as something not for us and we develop a phobia of buying stocks.
#12 Depression – We drink, pray or cry. We think we are so dumb and we start to analyzing where we went wrong. This is where true traders are born.
#13 Hope – We realize that the market has a cycle, which then renews our hope and we believe that we can still do it.
#14 Relief – The market turns positive once again. We are seeing the coming back of our prior investment and we now have our faith in it back.
The cycle will then start all over again and it is up to you how to play it this time.