As anyone who’s ever made a rash move in the heat of the moment and looked back in horror will know, our psychology can have a huge impact on how we make decisions under pressure. This is especially true of trading.
In everyday life, we say “emotional intelligence” to describe our ability to read other people and respond appropriately. We think of it as a soft skill for job interviews and a tool to keep everyone happy in group situations.
An investor must solve a problem every time they make a decision about buying, selling, or holding their assets. Those with low emotional intelligence follow their impulses without even realizing it, whereas high-EQ individuals are able to take a step back.
Why Investors Need to Focus on Emotional Intelligence
To understand why emotional intelligence is important, we only have to look at why so many who are drawn to trading or investing end up losing money. In fact, it’s fair to say that the majority of those who come to the markets, lose money.