Dealing with any volatile situation could put your emotions to the test, and when dealing with the stock market—where the stakes tend to be higher—you can’t afford to let them get the best of you.

 

As investors, it’s important to avoid emotional reactions in the market. They distract us from our investing rules and expose us to the possibility of making a costly mistake.

 

Understanding when you’re liable to make an emotional decision is just as important, if not more, than the actual decision itself. Recognizing when that bad decision is coming will help you understand yourself better and give you the blueprint on how to fix those flaws.

 

A good checklist of what to focus on to keep a handle on your emotions:

 

1.       Rules

·         Buy rules and sell rules

2.       Planning

·         Remember to plan your trade, and trade your plan

3.       Consistency

·         Stay consistent in your routine

 

The goal is to be as systematic as possible; better yet, think of yourself as a robot, with your rules as your programmed protocol! Keep perspective of what the overall market is doing and who you are as an investor. Remember that the rules you have set in place are based on risk management and designed to save you from catastrophic losses.  

 

To learn more, watch this week’s webinar "Investor Psychology,” by clicking here.

 

Best Returns,

The MarketSmith Team

 

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