|
|
|
|
|
|
|
obvious on one level, too often when caught in the anxious moment, we ''forget" this truth. |
|
|
|
|
|
|
|
|
All online traders and investors who are not day trading 1000-share lots (or more) and looking to gain a quick eighth or quarter of a point have the luxury to step away from the monitor and shake off fear and panic. |
|
|
|
|
|
|
|
|
Even under everyday, nonpanic conditions, periodic breaks away from the monitor over the course of a market session are crucial. Not only do they give you a chance to stretch your body and refocus your eyes on something besides a monitor, they also give you the necessary mental break. |
|
|
|
|
|
|
|
|
Catching Fear from the Media |
|
|
|
|
|
|
|
|
I'm just going to mention the media now since we are on the topic of fear. We will come back to considering its influence in Chapter 6. |
|
|
|
|
|
|
|
|
As an example of how real-time commentary may aggravate your stability, you need only watch CNBC during a market correction. Personal fear is intensified when we hear numerous "experts" on CNBC tell us how terrible things are. |
|
|
|
|
|
|
|
|
As the gloom and doom is passed around, we find ourselves being infected by it. This may lead to premature decision making to sell positions rather than ride out the rough period. Many viewers are influenced by what these experts say, even if these commentators have no real idea where things are headed. This is one of the effects of taking market experts too seriously. |
|
|
|
|
|
|
|
|
Taking Advantage of Overreaction |
|
|
|
|
|
|
|
|
If we understand that both individual traders and the market as a whole predictably overreact to news events, we can use this fact to make money. Much of the short-term (from minutes to hours to days) action of stock prices may be accounted for by this overreaction. Most of these events are not very significant to the longer-range movement of any given stock. |
|
|
|
|
|
|
|
|
Timing is of utmost importance in determining who makes money from these short-term overreactions and who is left frightened and sitting frozen. When there is general market anxiety or even panic, one way you can control your own emotions enough to jump in and take advantage of lower prices is by adopting an intermediate- or long-range attitude. |
|
|
|
|
|