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April 08, 2013, 08:38:22 AM |
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It's not made easy for us miners, traders and investors in general when it comes to the price marketing. The last downfall hasn't happened yet, and people are already becoming skeptical. This is where the emotions come into play. How can we control our emotions, and what and how do these emotions come in play when it comes to investing? Let me show the rainbow of the emotions.
Emotions are okay,
Emotions are fine, they're natural and therefor not bad at all. Every decision you make in your life, is based on an emotion. There is always emotion in everything you do. It's not bad, but we can try to maximize it. Forget the people and the rumors when to buy, and when to sell. These strategy do not work because your emotional wall is blocking them. Back to the rainbow.
Greed (First phase)
One of the reasons why people decide to invest in a market is because they want to maximize profit. In this case every outsider wants to be part of bitcoin/litecoin. And this is most likely the case with most people. However, the greed can give a negative effect and disturb the balance between risk and expected efficiency. You have probably heard of it sometimes from someone to start buying stock ABC, because it will 'definitely' go up. Here lays the emotion greed, and I advise not to go in on that kind of advise.If greed made you purchase a share, and it does go up, the glory and hope will be as high as a mountain. You bought because you thought it would go up, and it did. The thought starts to grow that it will most likely start growing faster and more. ''Lets make a quick buck'' is the ego with this.
You'll feel like a good experienced investor.
Pride (Second Phase)
As the stock continues to go up, you don't have to fear of outsiders who claim that it will go down. You are right, and you feel proud because you have made the right decision. The price going up is a confirmation of your knowledge. Your ego is flattered, your satisfied.
Meanwhile you slowly start turning blind. Meaning that you are likely to push all the good aspects of your purchase to the front, to highlight them. While the negative aspects of your purchase are pushed to the background. Negative news about your purchase is not even been seen or heard. A correct view on the price clouds. Here is the basis fundamental for a drastic disturbance between emotion and ratio. Objective observations blur, emotions threaten to prevail.
Your infinite glory must be seen by everyone, and you wish to share it with the world. Proud stores itself in pride and conceit. You start to talk at birthday parties about your brilliant purchase. You even turn cynical ''I thought you had knowledge of the markets, then why didn't you buy bitcoin/litecoin earlier?''
Love (Third Phase)
As long as price rises, you muzzle other investors mouths, don't you? As long as the price rises, than your right. But the emotional bond with the run becomes stronger and stronger as the price continues to rise. The balance between emotion and ratio is disturbed even further. Any kind of rational handling is far to be seen. Risk is denied, you are of opinion that the price can only go one way.
Euphoria (Fourth Phase)
The price of your share continues to rise, everyone at this time has decided to purchase some share as well. The trade in your stock slowly starts become less, and less. The profits start to become smaller and smaller. You believe the share in your stock will continue to rise and rise until it reaches the moon. However at this point everyone is slowly starting to join your stock. Even the small investor who doubted all the time is now on board. The big tough investors even expand their position.
Doubt (Fifth Phase)
The price starts to hitch. There's even a small downfall. But that doesn't fit in your view. Slowly you start to get doubts about your stock, and they start to become stronger and stronger. It hurts to openly admit that it isn't doing so good with your investment. You after all shouted out high how good you where with your decisions, didn't you? These painful thoughts reveal themselves even in physical pain, which you want to avoid. You walk away from your investment.
Disbelieve (Sixth Phase)
After the first doubts starts the process of disbelieve. Specially when your share starts to sink. It can't be true that you made the wrong decision? This phase of disbelief paralyzes the mind and ensures that drastic action is not taken. As an active trader, you should of intervened a long time ago.
Disbelief is associated with denial. Of course you made ??a wrong decision.'''The current downturn is only a brief dip, tomorrow goes better again''. At this stage, this is the familiar cries of despair.
Fear (Seventh Phase)
The prices start to sink even further, confronting you with your lack of action. Disbelief, denial and fear accompanied by a process of silence. You pull back silently in a corner, looking for straws that you can save. You understand that the balance between reason and emotion is completely gone. Emotion reigns with very remarkable results.
Panic and despair (Eighth Phase)
If you continue as the rainbow descends, you come to the realization that something is going wrong with your chosen investment. Even if you decide to sell, completely overcome by emotion, not realizing that it is a long time not going well, you have made a huge loss. You decide never to invest ever again.
Doubt and unbelief
You are confronted with your own emotions, your actually sitting as an investor in the daily rainbow.
I hope you enjoyed reading this. Posted this also on Litecoin forum.
Not allowed for publishing without permission.
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