Stages of Investment Psychology

The chart below is a visual representation of the 14 stages that Ill cover below. This
would be a great visual to print out and put in your office or desk to remind you to ask
yourself: here am I right now!"
1. #$TI%I&% ' It all starts with a hunch or a positive outlook leading us to buy a stock.
(. )*+IT)%),T ' Things start moving our way and we get giddy inside. e start to
anticipate and hope that a possible success story is in the making.
.
-. T./I00 ' The market continues to be favorable and we 1ust cant help but start
to feel a little &mart." 2t this point we have complete confidence in trading system.
4. )3$.#/I2 ' This marks the point of ma4imum financial risk but also ma4imum
financial gain. #ur investments turn into 5uick and easy profits6 so we begin to ignore the
basic concept of risk e now start trading anything that we can get our hands on to make
a buck.
7. 2,*I)T8 ' #h no ' its turning around9 The markets start to show their first signs of
taking your hard earned" gains back. :ut having never seen this happen6 we still remain
ultra greedy and think the long;term trend is higher.
<. =),I20 ' The markets dont turn as 5uickly as we had hoped. There must be
something wrong we think to ourselves. #ur long;term" view now shortens to a near;
term hope of an improvement.
>. ?)2/ ' /eality sets in that we are not as smart as we once thought. Instead of being
confident in our trading we become confused. 2t this point we should get out with a
small profit and move on but we dont for some stupid reason.
@. =)&$)/2TI#, ' 2ll gains have been lost at this point. e had our chance to profit
and missed it. ,ot knowing how to act6 we attempt to do anything that will bring our
positions back into the black.
A. $2,I+ ' The most emotional period by far. e are clueless and helpless. 2t this stage
we feel like we are at the mercy of the market and have absolutely no control.
1B. +2$IT302TI#, ' e have reached our breaking point and sell our positions at any
price. &o long as we can get out of the market to avoid bigger losses we are content.
11. =)&$#,=),+8 ' 2fter e4iting the markets we do not want to buy stocks ever
again. The markets are not for us and should be avoided like the plague. .owever6 this
rare point marks the point of ma4imum financial opportunity.
1(. =)$/)&&I#, ' e drink6 cry andCor pray. .ow could we have been so dumb we
think to ourselves. &ome start to correctly look back and analyDe what went wrong. /eal
traders are born here6 learning from past mistakes.
1-. .#$) ' e can still do this9 )ventually we return come to the realiDation the market
actually does have cycles EshockingF. e begin to start analyDing new opportunities.
14. /)0I)? ' The markets are turning positive again and we see our prior investment
come back around. e regain our faith Ealthough smallF in our ability to invest our
money. The cycle start all over again9