The Markets will EXPOSE you! | Investing Psychology Series - Episode 4.

Hey guys this is episode 4 of my investing psychology series. Today I want to talk about the concept of the market being your greatest teacher about yourself.

From trading and investing in various financial markets over the years I have come to understand intimately that any insecurities or emotional issues you have, the financial markets will surely bring to the surface. It may even bring issues to your attention that you never realized you had.

I have come to love this about the markets because not only are you improving your finances by investing your money, but you are able to transform your inner world as well. This transformation can translate to better friendships and better relationships, improved fitness and health, and overall self-growth. In my opinion this growth that you can achieve in many areas of your life from investing in the markets with real money on the line is second to only very few other practices.

So let's go through a few possible emotional issues, how they manifest in your investing, how this affects your long-term wealth and what you can do to work on these issues and become more profitable in the markets!

Emotional Issue #1: You don't feel like you deserve a lot of money because you have never had a lot of money. You feel unworthy of financial success essentially.

Manifestation in your Investing: You close out positions too soon when you have a small profit.

Long Term Affects on Profits: You will never gain enough profits to offset the inevitable losses by a large amount.

How to Improve upon this Emotional Issue: You need to understand that the market does not judge people and so it is not a case of "being worthy" or not. It is a case of making the right decisions and not closing out trades prematurely because you believe you do not deserve any more profit and somehow the market can sense this and will take them away! It is interesting to me how people in this day and age still believe in silly superstitions like this.

Emotional Issue #2: You have a strong need to be right and to prove other people wrong because of your parents not valuing your opinion when you were a child. You basically have an overly-inflated need for validation beyond the norm.

Manifestation in your Investing: You disregard some important information which goes against your first decision of which direction you think the market is going to in. You therefore make investment decisions based on only some of the available information, rather than seeing all sides of the story.

Long Term Affects on Profits: There will be a lot of variance in your account balance, in that you are basically gambling on the fact that you will be right the first time more often than not. Some months you could be up a lot through luck, some months you could very well be down a lot.

How to Improve upon this Emotional Issue: The most obvious remedy to me is to get validation elsewhere so that you are not relying on getting it from being right in the markets. A lot of people say you should validate yourself and not rely on outside validation. I don't believe in this, however, as we are programmed to be social creatures and therefore to care what at least some other people think of us. You of course want to find healthy ways to get more validation from people, by doing things like joining a sports club and therefore being part of a team, helping each other succeed in that endeavor.

So, in conclusion, I believe the financial markets will expose your flaws, if you are investing real money that is (otherwise there's no emotion involved because you have nothing to lose). How you deal with this, and whether you choose to face them head on and improve upon them or not will ultimately decide whether you will be successful in this endeavor (and many others in life) or not.

If you guys can think of any other types of issues that may thwart your success you can comment them below. Of course it is a very personal topic so I understand if no one wants to share that type of information!

As always, thanks for reading people and remember to up-vote to support the blog if you enjoy the content and follow me and I will follow you back!