CHAPTER 9Behavioral Selling

Everyone has the brainpower to make money in stocks.Not everyone has the stomach. If you are susceptible toselling everything in a panic, you ought to avoid stocksand mutual funds altogether.

PETER LYNCH

WHAT MOVES A STOCK?

Before you can use the tendencies and reactions of the market to your benefit, you must understand the basics of behavioral finance. My primary rule for success in the market is to keep things as simple as possible. When a stock is volatile and moves either up or down, it’s because there are more traders playing one way.

Over the years, I have been very surprised to learn just how many people don’t understand what drives a stock higher or lower. This is probably the most basic of information. A ...

Get Taking Charge with Value Investing: How to Choose the Best Investments According to Price, Performance, & Valuation to Build a Winning Portfolio now with O’Reilly online learning.

O’Reilly members experience live online training, plus books, videos, and digital content from 200+ publishers.