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LESSON: The Two Common Killers – Greed and Fear

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[op_liveeditor_element data-style=””][text_block style=”style_1.png” align=”left” font_size=”16″ font_font=”Montserrat” font_color=”%237e7e7e”]So far in this course we have discussed strategies and techniques of thinking that are not so common in the Forex world.

Fear and greed however, most traders have heard of.

Most traders (I actually say all if you have been trading longer than a few hours) have also experienced both of these two feelings and had their trading affected by them and that is why I call them “Universal Traders” emotions, because they are not just special few of us who get them.

Everyone who trades, whether they realise it (or they admit it) deals with these same human emotions as I will explain further below in this lesson.[/text_block][/op_liveeditor_element]

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Fear…

There are many types of scenarios that can bring on a feeling of fear in a trader.

Most traders immediately begin to think of losing money or the fear of being wrong when the subject of fear is mentioned, however there are other types of fear such as;

• Fear of missing a trade entry
• Fear of being stopped out
• Fear of the market turning
• Fear of taking profit only to watch a trade go onto be what would have been a massive winner

All these types of fear will have the same outcome. They will cause the trader to make emotional trading mistakes based on how they are feeling and trying to avoid feeling that way. For example the trader that is fearful of missing trades will jump on any trade even if it hasn’t finished forming or if it is a rubbish setup just so they can be in a setup.

 It is near on impossible to get rid of the feelings of fear in trading but what we can do is identify the role they are playing and use this knowledge to overcome. If we are fearful of losing money it is showing us we are not comfortable with the amount of money we are risking and we should lower the level of risk to a more suitable level.[/text_block][/op_liveeditor_element]

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Greed…

Greed can be quite a subtle mistake that can have disastrous outcomes. When traders blow an account it is normally because of greed. Traders fresh off a winning trade feel great, like they couldn’t lose.

What they are quickly forgetting though, is the market produces random outcomes so after their winning trade they decide to up the ante. They double their risk. You can quickly guess what happens next…….. Yes, they lose and are left crushed.

Another all too common scenario is the trader who aims for the skies with their profit targets. Instead of taking steady and consistent profits when the markets make them available, the greedy trader is always after that ONE huge win that captures them all, but instead is bagging loss after loss chasing the wins.

The silly thing is that if instead of looking for huge wins and being stopped out they actually banked regular profits they would be well in front and far more profitable!

Basic Fear / Greed Emotions

These emotions are the most basic of ‘Universal Traders’ emotions that we all get whether can recognise (and will admit it or not). We all at times experience fear in the markets of one sort, fear of loss, and we experience greed.

We all experience the feeling of not wanting to miss out on something like a big winner or a big profit somewhere or what another trader is doing = FEAR. “Universal Trading” emotions.

All of these feelings of fear and greed can be overcome by changing the way we think about our trading.

Beginning to Change Your Whole Thinking…

By starting to think in probabilities and beginning to realise that you can never know which trades will win or lose, you are starting to take the expectation out of each result.

When you take the expectation out of each result the level of fear and greed will be lowered as you realise that although this trade may be a loser as long as you have a profitable edge, over a large sample size of trades you will make money. Thinking this way you will be far less likely to risk too much on anyone trade, or try to take way too much profit from any one trade.

Whilst individual trades you make are important, your focus needs to be on your result over consistent and  sustained period of time that will create your edge.

If you lose a trade or win a trade it just falls within your overall bigger edge![/text_block][/op_liveeditor_element]