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Think and Act in the Plummeting Stock Market

Quantitative professionals and analysts can make a lot of money on the stock market, but the most successful investors also use psychology as a tool to increase returns. We give you some tips that can help you improve your investment spirit, straighten your thoughts and start thinking like a stock market.

Tip 1: Avoid panic

Panic is the emotion that causes us to make irrational decisions. That is, sell the stock when it should be held, or buy the stock when it is likely to be sold. Of course, our basic panic instinct cannot be completely eradicated, so the important thing is to control it. Jim Cramer attributed some of his success to the fact that he always thought unemployment was just a reward. But instead of letting him bite into the panic, he mocked him. He used that emotion to do more research and encourage him to gain a competitive edge. Anyone can use the same strategy to decide to be a better investor. Finally, take a step-by-step process of bad market news and thoroughly analyze the situation before responding to it. By delaying your investment decision by even a few minutes, your thinking process becomes infinitely clear.

Act in the Plummeting Stock Market
Act in the Plummeting Stock Market

Consider Near Term Catalysts

Stock market gurus like Peter Lynch and Warren Buffett have encouraged investors to focus on the long term, but there is some evidence to buy and sell timing as a potential short-term catalyst.
For example, a long-term investor who bought a stock in General Motors (NYSE: GM) in early 2005 because it looked “cheap” noticed that the investment would lose 50% of its value within a year. rice field. If the same investor responded to the short-term risks associated with rising fuel costs and waited for stocks to stabilize in the spring of 2006 before making a purchase, their investment would have increased by about 30% by Christmas.
Invest in the long run, but keep in mind that certain events can have a positive or negative impact on your investment. Use this information to evaluate the timing of your purchase.

Have a Fallback Position

Investors should always have a backup position in mind, whether that means creating a stop loss that is 10 or 15 percent below their initial purchases or establishing a hedge that may be used in the future against a certain position. This does not imply that you must act upon these ideas, but rather that you must be aware of these fallback options.

For instance, if you hold stock in a car company and gasoline prices are predicted to rise, you would want to think about hedging risk by investing in local oil company shares. Alternatively, if a decline in domestic consumer spending is anticipated, you might want to think about trading your fast food chain stock for stock in a firm that isn’t located in the US.

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