If you are interested in the world economy and especially if you are interested in the history of Wall Street, you definitely heard about Warren Buffett. The fourth wealthiest person in the world, he is the chairman and CEO of Berkshire Hathaway. His net worth is $88.9 billion, and he managed to make all this money with his incredible talent for investment Warren Buffett has a famous saying: “Be fearful when others are greedy, and greedy when others are fearful.” Let’s see how we can apply it to trading.
Don’t follow the crowd
The market is a circle - the prices rise, fall and rebound. Traders tend to follow those changes carefully but act on impulse - once the prices rise, they jump on that bandwagon of buying it as fast as possible in hopes of getting more profit. But that strategy might appear to be extremely unwise - once the asset is overbought, the price is going to fall drastically.
Keep that cyclical principle of the market in mind. If you pay too much for the stocks you are willing to buy, you risk losing your investment entirely. So watch out for those mass hysterias - don’t give in to the temptation, act wisely.
Go your own way
Once the prices fall down, there is a tendency to panic-sell everything, getting rid of the assets that you have bought at a higher price. That’s where you should bring in your logical side: if the market is cyclical and prices tend to go up and down in waves, there is a potential chance that they get higher, and there is no sense in making any rash decisions.
According to Warren Buffett’s famous advice, it’s important to be brave and choose on-sale shares - be greedy when it comes to great potential of your investment, but more than this be smart-working. Analyze the market, use fundamental and technical analysis and never allow panic to overcome your senses.
Don’t go against the trend
Nevertheless, it’s never a good idea to go against the trend when it’s in its bloom. Be practical about it - set support and resistance lines, make a prognosys about whether this trend is going to end soon or it will still go on for some time. Yes, the prices for this asset X you are willing to buy are going to get lower - but how much time will it take?
Rationalize your choice
It’s important to look into the future and seek assets with great potential. Reach out, look for information that will help you make an informed decision, read the news and stay in touch with the latest trends.
Overall, it’s important to estimate the value of your investment. There is no point in getting stocks during the hype if you don’t know when the trend is going to reverse. Make the market work for you by investing smartly.