Understanding Your Own Emotions How To Overcome Our Emotion? (1) Be aware of our inherent emotion and instinct. Always try to be on the other side of the situation. If we are fearful, analyse the whole situation with reasons and financial ratios. Focus more on the fundamentals rather than our emotions. (2) Diversify our asset classes. If we are not good at handling our own emotions, put less money into stocks and more into other asset types like bonds, properties and cash. So we risk only a small portion of our net worth, hence, we may be able to act soberly even when another financial crisis arise! (3) Stay detached about the whole business. Act as if we are a robot with no emotions and perform the necessary course of action strictly according to our investment plan, that is, according to the 3-to-1 reward-to-risk ratio. That is: if our target profit is 30%, our cut loss point is 10% below purchase price. If our target profit is 60%, cut loss at 20% below the purchase price.
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