1. Common psychological misunderstandings:
1. Blind obedience Due to the lack of in-depth understanding and analysis of the market, other people's analysis and operational suggestions often become the "basis" for many individual foreign exchange investors' transactions: as long as there are people around who have made a transaction, they will scramble to do the same transaction. Also unwilling to cut positions decisively. I am not afraid that everyone will lose money together, but I am afraid that everyone will make money and only you will not make money.
2. Greed and fear Greed and fear are twin sisters. Because of fear, they dare not buy when they should buy, and because of greed, they don't want to sell when they should sell. It can be said that the alternation of these two kinds of psychology is the root cause of short-term fluctuations in the market. Overcoming one's own greed and fear can avoid unnecessary losses, and using market greed and fear can obtain excess profits.
3. Regret seeing investment opportunities, but not trading due to various reasons, the most likely psychology to appear afterwards is regret. The lethality of regret is not to lose an investment opportunity, but to affect future investment behavior. There are two ways to overcome regret: strictly follow the trading plan; tell yourself that investment opportunities are always there, and let the past pass.
4. Be superstitious about external things rather than the market itself Another major psychological weakness of individual investors is superstitious certain news and rumors in the market, instead of obeying the trend of the market itself. Excessive reliance on other people's opinions and a certain technical indicator is also this kind of psychology.
2. Common misconceptions:
1. Indecision, delaying the opportunity Some investors have made investment plans and strategies in advance, but when entering the market, their investment behavior is influenced by the external environment. For example, it is pre-determined that when the exchange rate of a certain currency falls to a certain level, it will be bought immediately, but when one looks at the market, no one dares to buy or some people are still selling, so they dare not act according to the plan.
2. Unwilling to stop loss when losing money Many people often have this kind of experience: the trade that loses money is delayed again and again, and the loss is hundreds of points. Usually, you expect to earn dozens of points before entering the market, but the result is often that the market price seems to have eyes, always turning around when it is only a little away from the exchange rate you want to enter the market, and never returning. The main reason for reluctance to stop losses when losing money is that it is very painful to admit mistakes, and investors must have the courage to face reality and admit mistakes in a timely manner.
3. Specially pick bargains. After the exchange rate of a certain currency plummets from a high level, there are always people who buy it to rush to rebound; or buy it in a hurry after the exchange rate hits a new low. These are all cheap. We must know that a sharp drop from a high level often means a reversal of the upward trend, and a new low means the continuation of the downward trend. At this time, buying is going against the trend, and the risks can be imagined.
4. Stock speculation into shareholders The famous stock market quote borrowed here refers to the wrong investment behavior that was originally intended for short-term trading and long-term holding after a wrong judgment. If the expected market does not appear within the expected time after short-term trading, the loss should be stopped in time. Correspondingly, it is also a wrong investment behavior to rush to sell because of the short-term rise, which is originally a medium-to-long-term transaction.
Summary: It is obvious that investors' emotions affect their investment behavior all the time. Daily market fluctuations are the result of many investor sentiment and psychological changes. Changes in investor sentiment and psychology, and falling into some kind of psychological misunderstanding, are all rooted in the representativeness bias in human behavior. Therefore, the key to investment success has changed from rational decision-making to overcoming one's own human weakness and psychological tendency. The enemy investors face is not the market, but the investors themselves. Today, behavioral finance can be described as a good medicine to guide and help investors understand themselves and improve their investment decisions. If you want to invest and make more money, you must never make common psychological and behavioral misunderstandings, because if you don't make these common mistakes, your chance of making money is less than 50%.
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