The business of trading

Investing in the stock market is often exciting and at times can be very rewarding. The rewards are easy to explain because you want rewards, the more the better. However, when it comes to losing money , it is an entirely different feelings.

Trading is always associated with different level of risks and we often need to find the level of risk we are able to tolerate and comfortable with.

One of the biggest mistakes is that if we try to invest our money that we cannot afford to lose and we need this money for our basic living like buying groceries or paying our utilities bill , then that is not investing, that like gambling in Las Vegas.

The stock market has been proven to be a fantastic place to invest and grow our money over long period of time and accordingly to finding, it is one of the best asset that outperform other class of assets over a 20 years time span. However, investing in hopes of making a fortune overnight usually involves tremendous amount of risk and never be done except with "risk capital" which mean money you can afford to lose without changing your present lifestyle and financial circumstances if it is lost.

Investor often has to battle the emotion of fear and greed in the stock market and therefore we if we are not able know what has gone wrong and have the discipline to put a stop lost and a trading plan to exit because of greed , then our career in the stock market is often said to be short-lived. The discipline investors are said to be very mechanical and automatic. They have a trading plan and they stick to it as they know that not every investment is a winner.
As said earlier, the biggest enemy of an investor is emotion, when stocks are dropping and investment starts to lose money , you may get into "house of pain"and with this feeling, it is difficult to make good decision thereafter, worst of all, you find it hard to sleep.

In conclusion, managing the risk before going into a trade and stick closely to our pre-determined trading plan of entry and exit points will help us to take the emotion out of investing.