One of the best ways to lose all of your money in stock trading is to fight the market. The market reacts based on several factors, but chief among them is simple human behavior. There are controlling factors that dominate the way the market plays out, and if you can learn to recognize those behaviors, you’ll make a killing in the market every time.

FEAR is the number one factor that affects the market. Don’t believe me? Watch a stock price after a bad earning’s announcement. What happens? Prices plummet as traders exit their position. Do quarterly earnings announcements indicate an underlying problem with the company? Maybe. It would be worth some research to check the quarter on quarter performance of the stock price to determine if you’re hanging onto a sinking ship. But usually, a bad quarter does not a bankrupt company make! Still, the market is full of speculators, and if you can determine how their fear is going to trend a price, and position yourself carefully, you will walk away a winner, no matter which direction the market takes.

IGNORANCE goes hand in hand with fear. Stupid people invest in the stock market all of the time, lazy traders who follow “hot tips” and numerical formulations for get rich quick schemes. They are the bread and butter of stock fluctuations, and when you can identify where their money is going, you can profit greatly. The opposite of ignorant is the learned. They make mistakes, but they don’t fail. A failure is a mistake you don’t learn a lesson from. Smart people don’t fail. Smart people learn, and don’t allow ignorance to persist. The best way to learn is through researching the market, and studying the history of trading.

HOPE is the killer of many rich dreams. If you want to fight the market and lose your capital, use hope as your inspiration. Hope that the price will reverse, hope that earnings won’t affect the stock, hope that the overall economy will have no impact on your trade. Hope may spring eternal, but it’s usually fueled by ignorance, and guided by fear. The opposite of hope is know, as in you know which direction the trend will fold. Knowing comes from study. If you know, you don’t have to hope. Leave that to the uneducated traders who are going to help you make money on each and every trade.

GREED is good. No more famous words were quoted and re-quoted by Gordon Gecko want-to-be traders around Wall Street than those. Greed can rule the market on any given day, greed can make blood run on the Street. If you can recognize a trend from reading historical analysis, then you will never be ruled by greed. If you plan each stock trade with thoughtful deliberation, you won’t have to worry about greed. Greed is one of the seven deadly sins, and for good reason. It indicates we are taking too much, more than we can handle and it’s going to hurt us. More money is going to hurt us? No, you can make more money on a consistent basis through careful planning and picking. Greed is something different. Greed is staying in the trade too long, trying to squeeze out every penny of profit, instead of exiting early. Is there a fine line between making the maximum profit before exiting or walking away with money on the table? Yes. Will you be able to identify each of those times during a trade? No. Can you exit a position with a profit, and reenter with additional capital to risk the trend going higher? Absolutely. So long as you protect your position with a stop loss order and play out the risk. There are pivotal points in prices where history and tradition take over, and the stock won’t trend higher. You can learn this by studying the chart history, and risking that “this time” is the time things are going to change. (recognize hope here?) But if you’re all ready made a profit, and you’re risking a little capital to earn additional profit, then be just a little bit greedy.

Learn to recognize human emotions and how it will affect the stock market and your trading days will be filled with profit. Remember that historical trends have an impact on the day to day fluctuations of the market, as other traders who do their research are taking positions and affecting prices. With the knowledge that other traders are using the same charts you have access to, and building their trade off that information, you can have an advantage by knowing which emotion is ruling the market on that trade.