GFH (Greed, Fear & Hope) Factors and Markets

Friends,

At this juncture of Stock Market Collapse or say Volatality, I felt to write some of my own thoughts here.

There are 3 most factors that effect a Investor or a Trader in the Markets.
Of them are Greed, Fear and Hope. I will list a breif description of each of the below.

Greed: taking the meaning from Webster's (noun)
1. Excessive desire to acquire or possess more (esp material wealth) than one needs or deserves.
2. Reprehensible acquisitiveness; insatiable desire for wealth (personified as one of the deadly sins).
Greed always says, wait a little more so that the holding will rise and can make more Money.

Fear: taking the meaning from Webster's (verb, felt more appropriate)
1. Be afraid or feel anxious or apprehensive about a possible or probable situation or event (example: If I dont enter this stock now, I will loose on it).

Hope: from Webste'rs (verb, best suited for Markets)
1. Be optimistic; be full of hope; have hopes; "I am still hoping that all will turn out well".
2. Intend with some possibility of fulfilment; "I hope to have finished this work by tomorrow evening".

Well holding a loosing position even if it down to 20-30% ? This is Hope, that make you feel that the stock will go up and you can recover your lossess.


No one can shy away or exempted from these 3 factors when involved in the Marktes. Let it be those FII's, Fund Managers or our new breed of Tech Savvy Brokers, Professional Traders or the Retail Investors.

When this thought comes that, which breed of Traders/Investors get killed or maimed in a Steep Correction? The answer was simple, 90% of the time, the retail investors followed by Professional Traders, Mutual Funds (unless, they have a really Bad Manager like me ) and very minismal are the FII's.

Why so the retail investors get killed, when the same GFH Factor governs one and all? Well, the answer is simple, if you understand the markets very well and for the laymen it goes this way.

The simple difference between Life and Death in the Stock Market is controlling the GHF Factor. The less the GFH Factor, the more the Survival here.

That is the reason, why the FII's, Mutual Fund Manager and Professional Traders survive here more than retail investors. Since they know how to control their GFH Factors.

Variably or Invariably why others can control their GFH factor and why not the retail? at the end all are human beings! The thing is there are checks and balances in terms of methodologies to control the GFH for the Big Guys, there is no one to control a retail as he his a Boss for himself. Thats how the self destruction starts.

The 3'Ms: The 3'M ( Mind, Money & Methodologies) will help you control the GFH Factor. I am lifiting this straight way from Alexander Elder's book (Trading for A Living & Welcome Into My Trading Room).

1. Control the Mind and overcoming the emtions ( GFH Factor).
2. Protect your Money( mazimize profits and cut lossess by Proper Entry and Exit Plans)
3. using Methodologies ( Pyramiding, Reverse-Scale Techniques, Stop Losses)

Also, these days Trading Systems are available for dirt cheap. If you want to make money, be ready to spend money to get your proper setup.

Like
1. For a swing or short-term trader, a EOD Charting Software is more than Enough
2. For a Day-Trader, access to Real-Time data is crucial, even a 5 min delay can kill you.


I may have presented this not in a orderly fashion, but most of them I learnt some myself, some reading books and some from the Traderji forum.

Satya

Hi Satya,
Great writeup!! The GFH factor----as u have rightly stated---is the true culprit----We finally tend to blame the Market at the End of the Day---but a little bit of self retroscope can actually make a huge difference between the winners and the losers---
Also for Real time trading -----not only the access to real time data is essential----but a proper matured approach and a significant knowledge of the scrip one is going to trade in-----finally makes the ultimate difference in this virtual simulation of the Game of Life---
Regards,
joy_mitali

Joy,

Thanks very much for your thoughts. Yes as you said Day-Trading involves much more factors than for a Swing or Short-Term.

This forum has given so much knowledge and it is still growing, hope it teaches many more common people in the future.

Satya

Satya, what should I say? This is the finest post came from you after a long time. Great write-up. Very well explained GFH factor. Readers must assimilate this single factor and implement in life why only in trade! Am I right? Good one. Keep them coming.

cheers,
nkpanjiyar

nkpanjiyar,

thanks for your compliments, just see the response only 2 replies. Looks like many are still interested to get Tips only here .

Satya

Hi Satya

I was looking for tips from you (You never gave one) but got a big lecture. So I also wrote my big lecture else where inspired by you as always.
GFH and 3M concepts are just appropriate at this juncture.
Pankaj