One Of The Paradoxes That Can Happen When Investing Our Money Is That If You Have An Intense Desire To Win In The Stock Market, You Will Lose Or At Least you’re going to Have It Harder.
Why? Because Desire Focuses Too Much. That Is, It Focuses On Small Details, The Clear And Intense Goal Of Making Money, And Does Not Let Us See What Is Around.
Probably This Mental Trait Comes From Our Past As Hunters.
Tiger When The Hunter Feels Hungry And Has An Urgency To Hunt, All His Senses Are Focused: The Attentive Look At Any Movement, The Ears Pending Of Any Sound, smacking Of The Profits If It Captures The Precious Prey The Gazelle Or The BBVA?
At That Time, Irrelevant Details That Are Not Related To The Hunt Are Completely Ignored. There Is Only The Prey, And Any Movement That Does Will Confirm Our Desire And We Will Launch.
This, Which In Terms Of Survival Is Likely To Be Very Beneficial, In Terms Of Stock Market Investing, Can Be Disastrous. The Urgency To Win Will Make Any Information We Receive Confirm Our Opinion That It Is A Good Buy, And We Hunt With Little Information. And We Will Ignore What Does Not Confirm Us.
It’s The Confirmation Bias, And It’s Bad. What Is Desirable Is Precisely The Opposite: To Have Our Mind Open To Many Aspects Of The Investment, Including Fundamental Aspects Of The Company To Buy, Aspects Chartists, And Stock Market.
When We Receive A Lot Of Information About A Possible Purchase, We Also Run The Risk Of Not Being Able To Digest It Properly. But If We Do, If We Know How To Assign A Relative Weight To Each Data Received Without Blocking Us, We Are Going To Make A Much Less Frequent Mistake.
On The Other Hand, Do Not Be Afraid.
Like The Intense Desire To Win, The Fear Of Losing A Lot Of Money Also Focuses Too Much On Us. In This Case, Our Focus Is On Running Away. In Selling Our Investment Fast.
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And Just As Before, This Excessive Attention Can Make Us Lose Sight Of Many Relevant Details, And Sell Too Soon.
The Probabilistic Inverter.
So What Is The Correct Way To Deal With Our Investments? Focus On The Analysis Of Possible Purchases .
And That Will Be Simpler If You Are Not Willing To Buy, Nor Do You Need To Win, Nor Do You Mind A Pepper To Enter Or Not In That Action That Everyone Talks About.
As Eric Bana Said In The Movie Lucky You, “Money Is The Score”. We Have To Focus On Our Method, Not On The Stock Market, Not The Money.
Because After The Analysis, Comes The Knowledge: The Probability That We Have To Win.
And Knowing Our Odds Knows A Lot.
In General Terms, The Probability Of Making A Profit On A Share Sale Is 30% To 40%. That Is, It Is Easy To Have Up To 70% Chance Of Losing On A Purchase.
That Figure Is An Average, Of Course; Depends On The System Used:
If You Are Looking For Strong Profits With A Buy-Sell, Your Percentage Of Hits Will Probably Be Very Low, 30% Or Even Less. If You Settle For A Little Gain On Each Sale, The% Of Hits Can Be High, 60% Or Even More.
But It Does Not Matter Too Much% Success, You Can Win In The Stock Market With High% Or With Low% Of Hits, Depending On The Average Profit And The Average Loss.
But The Interesting Thing About Knowing Our Odds Is That It Allows Us To Distance Ourselves From Irrelevant Purchases. If You Know That On Average You Only Get 4, Or 3, Out Of 10 Purchases, You Think Twice Before Throwing Yourself.
A Correct Mental Approach To The Complex World Of The Stock Market, And Its Strong Emotional Swings, May Be The Key To Survival.