Understanding Greed As a Trader

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Trading Psychology: Understanding Fear and Greed

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Fear and greed are two of the most important aspects of trading psychology as these emotions can affect your trading career and profitability – big time! So read this article and learn how to take these emotions out of the picture.

Trading Psychology

The psychological aspect of trading is extremely important. Traders Wibest FSMsmart Review usually dart in and out of stocks on really short notice, requiring them to come up with quick decisions.

To do this, they need a certain presence of mind. By extension, they also need discipline so that they will stick with the previously established trading plans and know when to book profits and losses. Emotions simply aren’t necessary when it comes to trading.

Understanding Fear

When a trader receives bad news regarding a certain stock or the general market, it’s not uncommon for the trader to get scared. It’s possible for them to overreact and feel forced to liquidate their holdings and go to cash or to refrain from taking on any amount of risks. If they decide to do that, they may be able to avoid certain losses, but they will also miss out of huge gains.

Traders need to understand Wibest Broker News what exactly fear is: it is a natural reaction to what is perceived as a threat to their profit or money-making potential. Quantifying that fear is a great idea, and traders should also contemplate about what they are afraid of and why exactly they are afraid of it.

By considering this matter ahead of time and knowing how they may instinctively react to or perceive certain things, a trader can hope to isolate and identify those feelings during a trading session, and then try to focus on moving past the emotional response.

Obviously, this is not easy and may take enormous amounts of practice, but it’s necessary and crucial for the health of your investment portfolio.

Dissecting Greed

“Pigs get slaughtered.” That’s an old saying on Wall Street that refers to greedy investors hanging on to winning positions too long, trying to get the very last tick. Greed can be extremely devastating to returns since you will always run the risk of getting whipsawed or blown out of a position.

Overcoming greed is also easier said than done. It’s usually based on an instinct to try to do better, to try to get just a little more. A trader should learn to recognize this instinct and come up with a trading plan based upon rational business decisions, and not on emotional whims or potentially harmful instincts.

Trading Rules and Plans

In order for traders to get their heads straightened up and to avoid emotional fits, they need to create trading rules. They should lay out the guidelines based on their risk-reward tolerance for when they will enter a trade and exit it – whether through a take profit order or a stop loss – to take emotions out of the equation.

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Also, a trader might say if certain news like positive or negative earnings or macroeconomic news comes out, then he or she will buy or sell a security.

It would also be a great idea to set limits on the amounts they are willing to win or lose in a day. If the profit target is reached, they can take the money and exit, and if the trades hit the losing limit, they can pack up and leave, preventing further losses.

Understanding Greed As a Trader

The Swiss proverb says, “ Greed is the most dangerous emotion.” This is very true for most traders. It is an undeniable fact that a lot of traders have suffered a lot due to greed. This is actually were the famous trading saying “Bulls and Bears make Money and Hogs get slaughtered” came from. Hogs are the greediest of the animals an in trading there is no mercy for traders who embodies hogs. Because of the risk for people falling into the pit of greed, it is pretty much ideal to understand what it truly is.

WHAT IS GREED?

Common dictionaries describe greed as a selfish and extreme longing for more of anything (including money) than what is needed or necessary. This sounds familiar right? Yes, many of us are guilty of being greedy. It is our longing to get more returns that push us to trade and such desire is no longer healthy and then become dangerous when done excessively. This is why it is often deemed as a very dangerous emotion for anyone involved with trading. This is considered as something worse than fear. Fear paralyzes you and keeps you away from trading however; you still have your capital preserved just as long as your hands are in your pocket. On the contrary, greed lures you towards acting in times and even in ways that are not good. This is why greed is dangerous.

WHAT ARE DANGERS OF GREED?

Greed can let you act in an irrational way. As a trading greed may come on various ways including, overtrading, market chasing, and over leveraging. These are things that you should exit once you know it is happening to you already. As a matter of fact, greed is similar to alcohol and drugs. It allows you to do foolish things especially when you have too much already. When greed has already clouded trading judgment, it is then that you are drunk with it.

HOW TO OVERCOME IT?

Just like other necessary gestures, conquering greed needs more discipline and effort. It is not that easy but overcoming it is possible. It’s just about how to tame the ego. You need to accept your fault and admit that every call is not always right. There are times when you cannot grasp the full move of the market. There are also times when you will miss out on a good set up.

FINALE

This is how trading is. The moment you learn how to accept that you are smaller than the market and that you will surely commit errors, it is by then that you can be more focused on following your plans and not submitting to greed. Many successful traders believe that it is better to be lucky rather than simply be good. For these traders, it is better to depend on luck rather than trust on their capabilities. This is not good for the ego, but it is great for the trading psyche. Don’t let trading be a blame game because of greed but rather make it a thinking an analysis game.

Greed: A trader’s nemesis | How to overcome it?

Greed is the worst enemy of all in Forex trading. It is time to look into ways that can help you to defeat this enemy whenever it surfaces. The first step in doing that is understanding how Forex works and fully comprehending the reality of it. Once this understanding is clear as daylight in your mind, greed will gradually lose its power. In the subsequent articles, we will also discuss some additional ways to manage greed in forex trading.

Forex Market is bigger than you think

The forex market is so huge and you are just one of the million of traders who are trading Forex. What does this indicate? This means mistakes are bound to happen and there will be losses along the way. Accepting this as a normal, can actually help you to remain calm after losses and be careful when you execute your trades.

When greed drives your decision, you forget this reality. If you have seen some consecutive profits, the euphoria of winning can make you crave for more and you may temporarily forget that the master is a lot bigger than you. It gives you a false sense of control and makes you be less careful.
So, fix this thought in your mind: There is no way for you to be right every time. Even the most experienced, the most skilled and the richest Forex trader cannot be right at all time.

The Greed to be Right

In the post about fear, we said that one of the fears is the fear of being wrong. The other side of the same coin would be the greed to be right. So, greed doesn’t have to be always about money.

Have you heard of the expression ‘Better lucky than good’? Forex trading certainly isn’t gambling and becoming more skillful is always a possibility. But, there is a good secret to handle the greed to be always right. It is to attribute your successful trades to luck rather than attributing it with your own skill. Your skill is directly linked to your self-image; the desire to be always right is linked to your self-image too! So, attributing your success to luck is really good for your psyche and helps you to reduce your greed to be right.

Organize a system

When you have a good trading plan and trading discipline, it is difficult for greed to take over your mind. So, it is always advisable to have a concrete trading plan and develop a good discipline in trading. This discipline also includes good risk management too. If you make it a practice to not to risk more than 2% of your capital and stick with it, then greed cannot touch you that easily.

Make sure you are always conscious of how greed influences your decisions. When you bring more awareness to your thoughts and emotions, you can see very clearly when greed creeps in. As you remind yourself how detrimental greed can be in Forex trading, it will slowly fade away.

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