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Stock Psychology – Where Schizophrenia lies

For those of who look for opportunities in the market, finding a stock is only the first obstacle.  You may find the right stock for you, but the voices in your head may tell you otherwise. You see the market can become delusional and paranoid and even have delusions of grandeur at times. You may spend your time finding the right stock, ETF or investment product that meets your needs. You may buy it convinced that now is the time to buy. The rush of serotonin and endorphins from pointing and clicking feeds your immediate needs. You feel productive, happy and pleased. Once your brain breaks down the neurotransmitters and reality sets in you may begin to question your decision. Now you wait and watch.

The next step—how long you hold--  depends entirely upon “you” and your circumstance, and when I say “you” I mean all the genetic and millions of events in your life that have come to shape your personality. Your circumstance depends on the dozens of financial obligations you may --(or may not)-- have. Scared money runs away fast. These forces shape how much you can tolerate the schizophrenic movements your security will make. Of course the more movement the more emotional you become. Regions of the brain associated with complex decision-making, such as planning an escape, the periaqueductal grey area, that are responsible for quick-response survival mechanisms such as fighting, flight or freezing take over.

It might be tempting at this point to read all the  news articles, blogs, company reports you can find to help reinforce you original decision. You may read articles or you might even hear Cramer saying how he doesn’t like that stock, so what happens next? You fly the coup.

At this point only time will tell if you were right, but I can tell you that most likely that if you did your home work and made the decision to buy you were probably right all along. How many times have you purchased a stock, watched it relentlessly and when it dipped past your buy point you sold, only to watch it go up from there?

Sometimes it pays to use the same intellectual thought you used when selecting your investment as when you decide to sell.




Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.