MICHEL PIREU: Investors who get a grip on their emotions do better in markets
The problem with trading and investing advice — what often renders it useless — is that while it might apply to one situation, it seldom applies to another. It then becomes the wrong advice.
This applies to the best advice from the best sources and it’s something seldom brought to our attention. Consequently, apparent contradictions can be found in everything, including those great "enemies" of the trader: greed, fear and hope.
Jesse Livermore is often quoted as saying, "These are [our] natural foes … it’s the hope of a recovery that prevents speculators from cutting their losses and the fear of losing a small profit that makes them sell prematurely." The advice that usually follows is that fear and hope are best overcome as they can prove costly. But what Livermore told author Edwin Lefèvre in Reminiscences of a Stock Operator was something quite different. "I sometimes think that speculation must be an unnatural sort of business," he said. "Because I find that the average speculator has arrayed against him his own nature. The weaknesses that all men are prone to are fatal to success in speculation."The speculator’s chief enemies are always boring from within. It is inseparable from human nature to hope and to fear. In speculation, when the market goes against you, you hope that every day will be the last day — and you lose more than you should had you not listened to hope — to the same ally that is so po...
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