Psychology for Surviving Investing ② - Tokyo Research Institute -
Hello everyone!
We are the Tokyo General Research Institute staff team!
Second installment of Behavioral Investing!
This timewe will think about the human psychology of profit and lossand how it affects investing.
When talking about investing, profit and loss cannot be avoided. In that sense, what we introduce this timeis among the most important in psychology related to investing.
【Super Trader Psychology Test】 is more enjoyable if you read it after taking it!
Now, let's get started!!
Why can't you become a Super Trader?
“Halfway to becoming a Super Trader, I failed at stop-loss and ended up salted away...”
It's a common experience for anyone, but what is the reason?
It is because “investors tend to decide to take profits too early, while they drag out stop-loss.”
For example, let's look at the following investing common sense story.
<1>
Aさん, who aims to be a Super Trader and has properly accumulated investment knowledge.
One day, based on indicators, they determine a stock X is good and purchase it.
They see a profit of 100,000 yen immediately.
Thinking it will go up further, they sell it.
However, stock X continues to rise, and they regret it.
This is an example of a failure wherethey missed out on profits they could have gained because they took profits too early.
Or another example like this.
<2>
Bさん, dreaming of becoming a billionaire, starts stock investments.
A stock Y purchased earlier has yielded a profit of 300,000 yen and shows further rise.
However, the stock price begins to plummet.
Bさん remains optimistic that this drop is temporary, but
it leads to a loss.
Eventually it becomes a “salted away” state.
This is another example of a failure wherea loss once incurred keeps being dragged out and the loss expands.
The silly failure is laughable only on this blog; in reality, many have experienced it.
So, how does a current manager act? If you’re curious, click here
Conclusion
In the first part, we touched on common investing failures.
These failures do not stem from lack of knowledge.
They are psychological issues.
This psychology is explained by“Prospect Theory”.
The explanation will be in the sequel!!
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