Robbie Burns
Robbie Burns's columns :
22/09/2008What a Crazy Week!
05/08/2008Now you can Short in an ISA
03/07/2008It's a Game of Two Halves
17/06/2008Lessons From Northern Rock
09/05/2008Trading - it's a Mind Game >>
16/04/2008Move up to Another Level
31/03/2008Margins are a changing!
26/02/2008Trading too much?
14/01/20082008 COULD BE A GOOD YEAR!
27/12/20072007: VOLATILE BUT PROFITABLE!

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Robbie Burns – The Naked Trader

Robbie has been trading full-time since 2001. His book "The Naked Trader" (which also has useful information on how to use advfn) has become one of the biggest-selling finance books, reaching the top 150 books on Amazon - order it here. Trades made for Robbie's website have amassed profits of more than £300,000. You can read about his buys and sells daily at www.nakedtrader.co.uk.


Trading - it's a Mind Game

09/05/2008
I've just been to see Derren Brown's new West End show. As I'm sure most of you know, he's a magician/illusionist and very good too.
 
What's that got to do with shares and investing then clever clogs?

Ah, well, Derren's show is all about messing with your mind. And your mind is the most important thing when it comes to investing. And sadly as humans our minds aren't really prepared to make us great investors.

That's because we are generally quite fearful. I know you are, ok? Don't try and fool me however confident you may appear to others!

 

And what trick does our somewhat fearful mind play on us that prevents us from making money on the stock markets?

 

Well quite simply... it stops us from buying shares that are going up! (Too fearful). And worse...it makes us buy shares that have gone down a lot. Our mind reckons if a share has halved it MUST therefore be a bargain. Our mind looks at it and then gets greedy.

Oooh, look, all it has to do is go back to where it was and I'll have made a fortune!  

 

I can promise you; from the hundreds of investors I've met it's the same story. They all buy shares that have gone down and simply can't bring themselves to buy shares that have gone up a lot.

Some clever psychologist will probably tell you why. I don't have letters after my name so I can't.

I suppose the mind sees a stock that's gone from say 200 to 500 and it gets fearful and whispers at you: it's gone up too much, it's gonna go down!

However from my many years of trading I know this. In most cases I've always made much more money from buying stocks that have already leapt up. And I've lost more times than not buying into falling shares.

Also, I've discovered it's best to carry on buying the ones that go up as they go up!
 
Losing investors will do the opposite: keep buying the shares that are going down in the belief that they are "averaging down" and therefore it will take less of an upward movement to end up with a profit.

Bad move, buster!

Think "Average up". And stop "averaging down".

Don't be afraid to buy good strong stocks that are rising. Be very afraid of buying the ones heading down.

It's quite difficult to do - and you have to train your mind to use this, how can I put it, reverse psychology.

I reckon Derren Brown would probably agree with me on all this, which would make him a rather good trader!

So - be under no illusion: train your mind, get over the fear, stop looking for "bargains" and end up a winner.

You can read Robbie’s daily market comments together with his latest buys and sells at his website www.nakedtrader.co.uk

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