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MANAGING PANIC IN SELL-OFFS

How to avoid panic and not be affected in trading.

Good morning community!

Today I wanted to point out how the mind can affect our operations in the markets. Panic triggers us to sell everything and save what can be saved…. Unfortunately, this is what happens in many of us. Knowing how to avoid panic is of great help in avoiding heavy losses.

We have already experienced this situation in March and April 2020 where so many people discovered their maximum risk appetite. However, this you don’t find out with the mifid questionnaire but by having your overall portfolio exposure in hand.

If we did not really know how much a single stock might weigh in our portfolio and how much volatility it has, we would always be in trouble when the market shows weakness or even goes down very violently (sell-off).

When our stocks continue to rise we have no perception of risk.
However, we have a pronounced greed for making gains increase exponentially and without limit (and that is where the true investor has to worry).

Why does he have to worry? Simply for the fact that he is most likely using very high leverage. Unfortunately, when the first drop occurs, the market will let him know that he is taking the wrong approach in the investment world!

How can panic be avoided?

The advice we can give to our trainees or to those who follow us in the various free webinars, in the telegram group or on social media, is to first have a very clear view of the asset situation. In fact, without a careful analysis of one’s assets, it becomes difficult to organize a serious and profitable investment plan.

The second key point is to have awareness and deep knowledge of your real risk aversion. In the event of general slumps and sell offs, therefore, one does not panic, but on the contrary, already having an accumulation and prevention plan one already knows how best to handle the situation.

The third important point is to know how to diversify one’s investments across different sectors, markets and financial instruments. By doing so, a balanced and compact portfolio can be created so as to best dampen the volatility of the financial world.

Have you already started planning for a possible next crisis?

Yes it is an anxiety-provoking question and I understand that, but a true investor is always prepared to deal with any market situation. In fact, it is precisely in times when everything is going well that we need to build up defenses and study new possibilities for extra income that can come in very handy in times of full crisis!

Sometimes I hear people who think that only by saving can they be prepared to face difficulties. Saving is a great thing, but it is absolutely not enough to grow our investor mentality. If liquidity were not properly managed through appropriate financial instruments, savings would lack the key partner to maximize its utility.

Another factor to keep in mind is the personal condition of each of us. Condition not only of assets, but also of age. Those who are closer to retirement are likely to be more afraid of market crashes, while those who are younger on the contrary should see this event as an opportunity to increase their portfolios.

For these reasons we try to point out a useful path for everyone so that you can have a clear and complete picture for what your investments are about.

https://open.spotify.com/episode/5KeF6lUH7tjmyDYPb48UY7?si=4n7-Z4i4TOCkZoPjo18BPA

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