Emotions are one of the main enemies of any investor. The fear of losing money makes you sell your securities prematurely, and the desire to earn money faster forces you to make hasty transactions, which lead to mistakes.
To avoid the influence of emotions on decision-making, experienced investors advise sticking to a rational approach and developing a clear strategy in advance. Here are some important points of investing psychology:
Confirmation bias: People tend to ignore negative signals, preferring to hear only good news.
History bias: Past successes create a false sense of confidence, which leads to underestimation of future risks.
Herd behavior: Imitating the actions of other market participants often leads to suboptimal results.
The best protection against emotional influences is having a clear system of trading rules and the ability to remain calm even during periods of market turbulence.