Trade without fear  by Jon25

In the mind boggling world of financial stock trading it seems that everything is driven towards mayhem without any rhyme or a reason. Is it really so? Anyone who has a good exposure to stock markets would vouch for the logic behind the stocks going up and down but all the reasons are not comprehensive enough for a new investor.

The most important factor in people not choosing stock investments is their fear of unknown. It’s interesting to note why greenhorn investors are so paranoid about trading. As a human nature, everyone wants to have a feeling of security and safety whether personal or monetary. If, knowingly this feeling of security is compromised, investors like to have a premium in return. It is prudent to mention here that how much risk an investor can take also depends on their risk appetite. 

The risk appetite is a function of investors’ understanding of how the stocks behave in long term horizon & his experience in trading. Many start-up investors are not able to see the order through the short term chaos created by seemingly illogical, sentiment driven trading. They get panicky whenever they see the fast moving numbers defying any logic in short time and hence the fear of uncertainty creeps in.

The best way to beat the stress of uncertainty is to take the help of statistical and probability numbers. These numbers in themselves are not the ends but they are critical for understanding the underlying meanings. For instance, a good study of probability gives improved expectancies after which understanding is the next step. A good decision making in trading involves a knack of quantitative abilities i.e. to be able to make sense of randomness and expected anomalies.

Summarily, understanding and winning in the market is a combination of skills which are usually at the extreme ends. The investors need to be focused on the long term results along with a continuous heed of short term randomness. The successful investor also needs to take the short term losses in stride and put his money logically into the various buckets available for investments. The logic can be derived by quantitative analysis of the market by utilizing the mathematical tools like Statistics or probability theory.