3 Simple Steps to Keep the Stock Market from Driving You Insane

Is the stock market turning you into this guy?

Crazy guy

Look, you’re not alone. We’re all dealing with an irrational, psychotic monster of a market. It’s a three-headed monster running on pure emotion. It doesn’t follow logic and if you’ll go nuts if you expect it to. You could also lose a ton of dough investing on that assumption.

But today I’m going to save you from that padded cell, my friend. If you take a few minutes to think about the market differently, you can save yourself a lot of pain and misery. Added benefit: it could also make you a lot of money. And who knows, you might even start enjoying life again!

So let’s get to it. Here are three things you can do to keep the stock market from shipping you off to the funny farm:

1. Stop staring at 5-minute charts

It’s tempting to watch the market during the day. And any decent online broker now gives you access to millions of ways to absorb real-time data. You don’t have to be Bud Fox to get access to up-to-the second quotes and one-minute candlestick charts. Hell, that’s the starter package in 2015.

But don’t do it. You can’t will stocks higher or lower. There’s no point in cheering on your open positions. In fact, staring at your stocks all day might actually cause you to make terrible snap decisions that ruin your trades. Your emotions and your trading success go together like oil and water. If I sound like a broken record with that message, tough. It’s that important. If you want to be a successful trader chuck your emotions down a well.

Set your buys. Set your stops. Then go play in a sandbox or read War and Peace. Unless you’re daytrading, that blinking real-time chart is nothing but trouble.

2. Start thinking about your risks first

The stock market offers a bonanza of opportunities to make money. You’ll reap the rewards if you put in the work. Or I should say, if you put in intelligent work.

Too many traders spend all their time fantasizing about all the gains they’ll make. And that blinds them to the risk. They see a perfect setup and start thinking about that fancy new car they’ve got their eyes on. You know where I’m going…

The market throws them a curve ball they didn’t anticipate. Then they have to figure out how to exit their trade with the least amount of damage. But they’re emotionally invested. Since they’re so committed to their stock, they can’t pull the trigger when they should. And they get crushed. That fancy new car will have to wait.

But the worst of it could have been avoided if they’d simply planned ahead and picked out a stop loss level before the trade. Better to lose a little than a lot.

Always have a stop loss level in place before any trade. And never back off it, no matter what. Remember what I said about emotions.

3. Repeat after me: “The market will do whatever it wants, whenever it wants.”

You’ve probably heard a lot of correction talk lately.

That’s because everyone and their third cousin thinks stocks needs to move lower.

But guess who doesn’t care? Mr. Market, that’s who. The stock market doesn’t care what you think. It doesn’t care what anyone thinks. So many people waste their time and energy talking about what the stock market should do, instead of focusing on what the market’s actually doing.

If that’s not insanity, I don’t know what is. None of us can make the stock market magically turn into a logical, rational creature. Ain’t happening, Jack.

So you have a choice…

Drive yourself nuts trying to convince a completely irrational market to behave the way you think it should. Or watch the signals it fires off each day and try to exploit them for profit, even if they don’t make sense to you. Or maybe I should say, especially when they don’t make sense to you. Because they often won’t.

These rules could help make you a lot of money over time. Ignore ‘em and you could be heading for the loony bin. Then the poor house. Or maybe vice versa.

The choice is yours…


Greg Guenthner
for The Daily Reckoning

P.S. Don’t let the market drive you insane. If you want to cash in on the biggest profits this market has to offer, sign up for my Rude Awakening e-letter, for FREE, right here. Stop missing out. Click here now to sign up for FREE.

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