For the newcomer to stocks and investing, one of my first pieces of advice is to remove emotion from the process.
Of course I understand that this is virtually impossible when you have your money on the line, yet emotions are a formidable barrier to success. Until you learn to separate your natural human reactions from your investing process, expect to lose money.
That’s why I feel compelled to discuss the most powerful force on Wall Street, what it’s capable of, and how you can harness it to make life-changing money…
Let me start by asking you this: what’s been driving the recent stock market recovery?
There’s been nothing but terrible news surrounding oil regarding oversupply and zero coordination between producers. The earnings data has been overwhelmingly poor – every day there are headlines reporting big drops for the big companies like IBM, Intel, Morgan Stanley, CitiGroup, and so many more.
Yet stocks have been climbing for over 2 months straight. How?
The answer is fear.
While there’s plenty to fear about the outlook for the economy and markets, there’s even greater for over missing out. The average investor will write off the real data for the sake of not being left out on a market rally.
People understand that there’s plenty to be worried about, yet the power of fear is keeping them in the game as buyers.
It’s the most powerful force on Wall Street.
So here are two simple lessons:
1. Learn to avoid fear.
2. Understand how to use fear in others to make yourself money.
The first lesson is something that may not come right away. Most people, myself included, have to learn the hard way. The key is to realize when you’ve let fear steer your trade instead of your process.
The second lesson may sound more cynical, but you may as well use fear to your advantage when possible.
And this requires some subtleties. The idea is to understand when the masses are being fearful one way or another, and to play your hand in the opposite direction.
Remember Warren Buffett’s advice, “Be fearful when others are greedy and greedy when others are fearful.”
So when people are fearful that the market will never recover, be greedy about the beginning of a new bull market. When people are fearful of missing out on a rally, be greedy about the impending fall…
And see that fall coming with the simple guidance of Code Breaker. Check your email for a special invitation.
