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A Nobel-awarding science. They are totally bogus. It is about an edge. It is about being early, or ahead of the crowd. It is about perception and psychology and capitulation and hubris. It ain't about P/Es and price-to-book anymore. Maybe it never really was. |
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Now Cramer is referring to frequent (but not necessarily day) trading when he makes these comments. For longer-term investors, the time horizon tends to smooth out some of the unpredictability and hour-to-hour gambling that occurs in the market. But our attempt as investors to balance greed and fear must still take this gambling aspect of the market into account. |
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In a market that may move unpredictably through wild swings based on greed and fear, to eliminate all emotion would mean to lose touch with the basic forces that are creating this movement. Again, the idea is not to eliminate all emotion but just not to let it dictate any momentary decision. Perhaps the best way to say it is: We use emotion as one input in our decision-making process, rather than let emotion use us. |
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To eliminate emotion altogether would be like saying that because emotions are sometimes painful and cause us to make decisions we later regret, we should give up on ever feeling emotion in our lives. We couldn't do it even if we wanted to. It doesn't make sense in our lives as a whole and it doesn't make sense with regard to the stock market. |
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It's just not as simple as surgically cutting out a fundamental human orienting system, not to mention the very core of human relations. Intuition and "gut feeling" should never be entirely eliminated from the picture. They will have a place, alongside our best critical and analytic judgment, using whatever fundamental and technical indicators we have found useful in our decision making. |
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One way to include emotion and strong hunches in this process guards against making any decision based too heavily upon them. It is especially appropriate for longer-term investors who do not make a lot of trades. Here is the mental discipline in the form of a rule: Never make a decision in the moment after a strong feeling or flash of intuition strikes. |
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Hugging the emotional flatline means showing the discipline to acknowledge the emotion or flash of intuition, letting it stick around for consideration, but not immediately jumping into action based upon it. This is especially important when it is so easy online to click a few buttons and own a stock. Momentary impulse can so easily be followed that we need to have a few simple ways to guard |
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