Stock market and psychology

Profit or loss in a stock depends not on the increase and decrease of the price in the stock but on the trader’s or investor’s psychology. To some it may sound absurd but it's true.

Stock market prices are always subjected to huge fluctuations either as an uptrend or downtrend. Downtrend sends panic signals and at times compels the traders to exit the market even at a loss. Sometimes when there is a profit of Rs 50 per share, one is complacent with it and books profits fearing a sudden stock fall.

This is the general psychology of intraday or short-term traders. Intraday traders generally exit even if they make a profit in rupees if not in hundreds. Contrary to this, the long-term investor isn't greedy about small profits nor does he panic when there is steep fall in the markets.

At times it becomes imperative to be immune to the shocks of stock market. General increase and decrease in the stock prices are a common phenomenon in the stock market.

Sometimes you may lose money because you went wrong in the selection of a stock or you purchased a stock at high price. At time a basic technical training program comes as a handy tool for guidance in crucial decisions like deciding the stock selection, entry and exit points etc.

One cannot take all decisions related to stock market all alone until you are a professional trader who has undergone some technical training programs. If you want to reap more benefits you need to understand your psychology. Are you a risk taker, what is your time horizon and to what extent you can bear losses or are you happy only with smaller gains and so on?

To sum up a strong psychological strength is conducive for reaping benefits in stock market. (The author is a homemaker who dabbles in stock market investments in free time)