Most of us work for a living, but the money that we earn rarely suffices to give us the lifestyle that we want. This is especially true with what’s happened lately with the economy. There is a feeling that world dynamics have changed and that Americans should no longer expect to benefit from the same period of economic stability and growth they have enjoyed in the past. The middle class is shrinking and salaries/ work security have hit a standstill.
In this new economic climate, more and more people are looking to utilize their savings to generate another source of income to supplement their wages. One of the first places people will turn to is the stock market. We’ve all heard stories of a stock rising 500% or more and all want to jump on the bandwagon to undercover the next gem. Why not, that’s easy money!
That’s what we all hope will happen. We’ll make extra cash that will help us improve our daily lifestyle or fund a nice vacation. When people think of investing, they only think of the upside, not the downside.
Losing money is what investors fear the most, especially when their trading account is funded with “money they cannot afford to lose.” The problem with trading with money that you cannot afford to lose is that you start upfront with a disadvantage: you will be emotional in your trading and will therefore make decisions, not based on market conditions, but based on your own fears.
Good traders are detached from the money they invest. That allows them to stay objective regardless of how their investment goes. You may think that when you trade stocks you trade against the market. If that’s your belief, you’re wrong. The market moves regardless of you or what you do. You trade against yourself, your demons, your fears, your own greed.