A Contract for Difference, or CFD is an two way trading deal between two different parties based on the rise or fall in the trading price of an agreed number of shares in a company over an agreed time – no actual share purchase is necessary. Although sounding complicated, it isn’t. Financial institutions and hedge funds have used CFD for more than ten years in the UK stock market as an alternative means of investment to traditional stock market trading. (more…)
Posts Tagged ‘stock market’
Is CFD Trading an Effective Alternative Financial instrument?
Friday, January 1st, 2010Stock Psychology
Wednesday, March 11th, 2009Every stock investor or trader should have a stock market psychology.
Whenever someone wants to invest in stocks he should have a certain kind of investor psychology. As a stock investor you should exactly know what expects you when investing in the stock market.
Most investors like stocks because the high dynamics in terms of price fluctuation is very attractive to them. But they only see those stocks which are in focus. In the latest finance news they are told again which stocks have gained most in value. After hearing those kinds of news some wannabe stock investors think that they could succeed in stock investing too because so many stocks are rising!
The following is wrong with this way of investor attitude:
Those stocks which have fallen dramatically or are still in their downward movement are not very interesting for financial news. But these shares which have lost a lot in value are out there too. So, who says that this potential investor will not buy one of this news-unimportant stocks?
In a stock investing psychology the shareholder has his emotions under control.
As a stock investor one should have the psychology where he has understood that stocks can also go down and that you are not always right with your investment decisions. You as a stock investor should know that when targeting a return on investment of 50% per year you must also expect a potential loss probability of 25% per year. Are you able to bear this loss rate?
If not you should lower your goal target from 50% to 30% where your loss potential can go down to 15% per year.
Another very important stock investor psychology is the control over fear and greed. These two emotions are the main factors which control the daily stock price movements. Not fundamental reports about our economy or the healthiness of a company drive the stock market. Fear and Greed are the main drivers of the stock market. Adjust your stock mentality in a way that you forget these emotions.
If your fear of losing money through stocks or your greed to become rich overnight dominates then forget an investment in the stock market as a long term loss is almost guaranteed.
Eliminate these two emotions within your way of thinking. Try that by saying to yourself that fear and greed are deleted and that you will be a very successful stock investor. This is truly only psychology but whoever has mastered this stock investor psychology has mastered the stock market.