Short-Term Market Moves are Driven by Emotions

Pinnacle DIgest writes: Emotions play a big part in how we invest. They determine what sector we invest in, when we invest, how much stock we sell in a profit taking opportunity or where we draw the line and cut our losses. In his latest article, Gary Tanashian examines the emotions of investors (today) after receiving a ton of negative feedback concerning one of his latest articles (which criticized the bears).

Tanashian points to the fact that in this market environment, when many are looking for reassurance that they are on the right side of the trade, investors get antsy and make irrational decisions. Much like real life, knee jerk reactions can create unpredictable consequences.

Gary examines all emotions involved in trading these markets. While he remains a long-term bear, as he has been since 2004, he explains that what matters is his short to medium-term outlook. And he’s right.

Why does a long-term outlook matter, as a trader, when policy makers aren’t looking to fix the big picture? Democracies around the world have become short-term solution machines. They rely on getting votes for the next election. Because of how democracies work, policy makers are forced to intervene in the markets and economy regularly in order to stop the bleeding. The de leveraging process is a painful one no leader wants to go through because it will almost certainly guarantee a loss in the next election.

Click here to read article.