Knowledge of psychology should help you inject rationality into your decisions.

The purpose of understanding psychology is to reduce the irrational component in your decision making.

To apply psychology in your stock buying and selling decisions, the first thing you should explore is your primary reason for making that decision.

Systematic thinking will help you determine what you know or do not know and overcome your psychological biases.  When you do not know the answer, you need to make a judgment call.

In computing intrinsic value, we have to make estimates or judgment calls.  Ultimately, everyone has to make judgment calls, but following a systematic approach will help you when you are making a judgment call.

Your ultimate question should always be "Is this rational based on all that I know?"  On average, if you go through a set of basic questions about the stock and psychology, you should do well in the stock market.

Of course, in the process of learning about yourself, if you conclude that you are likely to make irrational choices more often than not, maybe you should stay away from the stock market.  In that case, your situation may be similar to someone who knows the dangers of excessive drinking but cannot help but drink when he visits a bar.  He should learn not to go near a bar.

Overall, knowledge of fundamentals should help you estimate the company's long-term future, and knowledge of psychology should help you inject rationality into your decisions.


Related:

Strategies for Overcoming Psychological Biases

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