Just an article I found.

Don't get emotional about stocks.
The Wisdom of Gordon Gecko

Those of you who only recently began investing in stocks this year and have found all your previous profits wiped out in the past few days, I like to share some of my thoughts with you to give you some things to think about in these gloomy times.

Firstly, I'd like to share my personal experience with the last major market correction in May 2006 with you.

I first began stock investing in mid to late 2005, and by April 2006, I had already grown my initial $200,000 to more than $300,000. Because of my stunning intitial success, I believed that I was a stock genius and stubbornly refused to recognise the fact that some of my stocks were trading way ahead of their valuations.

Then out of the blue came the May 06 correction, and in just a matter of days, my handsome six digit profits were reduced to nothing, and I even found myself in the red.

I believe many people are in similar predicament now, and trust me, I can fully sympathise with the fear and regret you would be experiencing right now.

But you know what? I eventually managed to hold my nerve, and even summoned the courage to pick up some more stocks when the dust had settled sometime in July 06. I remember I must have bought at least $150,000 worth of stock then.

The end result - I ended up registering a 78% gain on my portfolio for 2006.

My purpose of sharing this experience with you is not to tell you to go out and throw your life savings into stocks right now. In fact, I actually believe there will be further downside to come, but as to how much I do not know, so please refrain from asking me to make a prediction.

Instead, I hope to encourage you to stay the course, to understand that the stock market is volatile and that prices will always go up and go down, in greater magnitudes than we can ever expect.

But if you can hold your nerve, and recognise that the market will fluctuate up and down even in a bull run, then provided you do not overpay for your stocks and only buy those with good fundamentals, then in the long run, you are definitely going to make some money.

Secondly, I want to point out to you one of the most common mistakes made by inexperienced investors:

Underestimating and Disrespecting the market.

Examples would be thinking that all you need is to find five multi baggers to transform $10,000 to $1 million, and that it can be done very easily and quickly.

Or thinking that since you managed to make $10,000 in your first month of investing, then as you get better and more experienced, you would be able to make 5 or 10 times more money than now.

Or believing people who tell you that they have sure-win stock tips, or how easy it is to consistently make money simply by buying when the market is up and then shorting it when it is down.

If you had ever harboured such thoughts, but now find that you are getting poorer now instead of richer, please take a moment to give yourself a good slap.

You have fallen into the age-old trap of getting over-emotional and being too greedy at the wrong time.

After giving yourself that tight slap, please ensure that you do not forget those mistakes. Please remember to learn from them instead.

Control your fear and regret.

Take a deep breath to control your emotions, to remember Gordon Gecko's wise words:

"Don't get emotional about stocks."

Then take the time to analyse, to eliminate, to consolidate.

And most importantly, take your time to find your strength in adversity, and your courage to be greedy when others are fearful.

While I have been doing stocks trading for more than a year, I made a number of mistakes over the past 7 trading sessions.

Firstly, I left open positions that were relatively risky when I knew I was going to be out the whole day. This was the one that started the whole story.

Secondly, I didn't stick to my cut loss level. My strict cutloss level that I have given myself was actually 3-5%. But that day, because I was out, it actually went to 8%. So being the emotional human, I hoped it would rebound to 5% then I shall cut it. It never happened.

Thirdly, In view of the losses, I started doing higher risk trades. Especially since its something I'm not familiar with. The result? Lost more money on every trade. Ugh!

Lastly, when its time to stay away, make sure you stay away and take a holiday. I was almost successful on this one.. I took a 3 day hiatus (including the weekends, that would be 5 days) from the market. However, when I came back, I traded carelessly again. Argh.

Hope the article is useful for those traders in you. How was your success rate in stocks? Do drop a comment :)

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