- Sagar Shah
- 6 March, 2021
Human emotions can
it comes to Trading
Stock market has two outcomes, either you make a profit
or a loss. There is no in
between, when it comes to trading of any sort for that matter, be it commodity,
share market or forex.
In the simplest of understanding, the process of
trading involves buying a stock at a
certain price and selling it back to a certain price. Whatever the difference comes
from that, decides whether you have made a profit or a loss.
“Win or Lose”
Then why is it so, that there is a 50-50 chance whether you win at trading or lose,
as per the history of the stock market.
Actually, there are multiple factors affecting stock
price, that decides whether it
will go up or down.
Considering this, it is almost humanly impossible to
take into the account of all the
factors, while placing a trade,
But the most common and influential factor of all is
the emotional state of a trader
on a particular day, or any outside circumstances too for that matter.
Emotional Trading: Overpowering emotions drive
Let’s consider a scenario where on a particular day,
the overall market is performing
well, and you are feeling confident to place a trade in a certain stock. As per the
market conditions the stock is expected to rise up and your strategy is to sell the
stock at a certain price.
Now, in spite of the market performing well, the stock
you have placed a trade on is
not moving an inch in the index. Remember we know that the stock price has multiple
factors that affect its performance, right?
What will be the emotion you are experiencing right
now? frustration, right?
“Flight or Fight response”
Now further in the scenario, the stock price is going
downwards, and the emotions you are
feeling is of panic and nervousness, and you decide to sell the stock at loss to
further loss, because you cannot imagine more loss on your trade.
Automated Trading: : An Artificial Intelligence tool
that uses computer programs to increase the probability of a stock, forex, or
This is when the role of Trading BOT comes into play.
Majority of traders are using
conventional methods to trade in the stock market depicted in the above scenario.
And that is why the average return on investment (ROI) is 10% in any year, which is
considered below average.
Now, the Trading BOT is an intelligent software that
implements logic required to make decisions in critical situations to ensure
profitable trade in the stock market. This trading is known as Auto Trade.
Forex Trader is a sophisticated software covering all
the market conditions and
scenarios which range in millions, which operates in the stock market only when the
ideal conditions are met to buy or sell stock, ensuring maximum return on investment
Obviously avoiding errors in decision making that
arises due to human emotions is
also the major benefit.