17: Giving Into Emotions
Greed is Good…well, that’s what Gordon Gekko says.
I say “Greed Is Bad” in online currency trading.
When you are having a string of winning trades, greed makes you take very large trading risks.
A classic example is this story about Fred Who Made A $1 million with 40 Trades but blew it up.
Fear is another emotion that forex traders face. If you lost money in forex, there’s always fear that you are going to lose again.
Or if you started with a $5,000 forex trading account but now that account is $2,500, then no doubt, you’d be trading with fear.
When you trade with fear, this is what happens:
- logic goes out the window because fear paralyzes you from thinking properly and you make bad trading decisions like placing very tight stop loss not based on market conditions.
- you hesitate to press the buy or sell button even though there’s a good trading setup staring at you right in the face saying “Buy Me!”
Solution:
- Nobody can eliminate free and greed. We are human. What can be done is understand that you have to deal with it, and control it.
- When I come to think of it, a large part of fear and greed happens because of lack of proper money management….If you are greedy and had a string of successful trades and you want to increase your account quickly you take big risks (that lack of proper money management). If you are fearful because you’ve lost a lot, the most likely reason is that the lack of proper money management got you into that situation.