Most of the Stock Investors are panic-struck and don’t figure out what to do now? Taking into consideration the colossal collapse of financial markets all around the globe the present panicky emotion seem justified. But is it really justified?  In fact no!98% of the investors are of herd mentality following their expert leaders either media persons, brokers or their friends. They follow their tips and advice to find themselves in dire straits. The same investors have purchased at historic peak levels with great enthusiasm and confidence caused by the GREED emotion!

Now when the indices have melted down to such low levels, the FEAR emotion is discouraging their minds to do proper research and invest wisely. So these are the two emotional factors which control the Stock Investment Psychology.

How to overcome these two GREED and FEAR factors?

Learning and doing Stock Technical Analysis is a sure way to overcome these 2 emotional factors. You have a clear-cut picture of the stock market as to the existing trend, your strategy should be to follow the trend until it shows weakness or reversal. The main thing to enjoy more winning trades is to analyze the existing trend and to be friend of that trend. Being on the opposite side is a sure way to heart burns and tragedies.

Money Management

Money management importantly depends on calculating risk-to-reward ratio on each trade you originate. If you know your risk at the time of initiating a trade you very well know how much will be your loss if the trade goes against you. With this good practice you are required to place a reliable stop-loss which is usually the historic support levels where the index or the stock previously rebounded and made several bottoms. So you are well prepared to lose some money in case your trade fails. Moreover you also know your minimum reward and you’ll book profit at the designated level. So the trading becomes sportive and enjoyable without any ego or personal prejudice.

Moreover, if you wish to invest a total of $5000, invest $1000 each during every dip of market index.  So when the market starts looking up your average rate will be better and the returns within a period of 2 to 3 years should be spectacular. Also the reward ratio is extremely good compared to the current market level.

Sector Analysis

It’s always prudent to select the best industry sector in this recession hit economy and find out the best performing 2 to 3 companies in that sector. These will be your winning horses in the next bull-run. There is no use selecting a company just relying on its name and past glory. The profitability and the earning power of that company might have deteriorated recently.

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