Currency Trading Information Channel
How To Control Fear And Greed In Trading
There is an old saying that the market is driven by fear and greed. Anyone that has placed more than a couple of trades will surely have experienced these two emotions.
All traders experience emotion. The distinction between a successful trader and an unsuccessful trader comes down to how they deal with that emotion. Let's look at how these emotions affect a successful trader and an unsuccessful trader in various scenarios:
1. The trader's three previous trades have been losers. The unsuccessful trader will consider this before placing his next trade and be fearful that this trade will also end up a loser. This might result in a delay in placing the trade whilst waiting for the price to confirm that they were right - thus missing a perfectly good entry. They might suddenly discover that some other factor, previously unconsidered, is a reason not to enter the trade at all. Basically they will be fearful of another loss.
The successful trader will have tested their strategy extensively and will be aware that a series of losing trades is very probable. They will also measure their success on whether they place the trade according to their system rather than whether it is purely a winner or a loser. They trust their system and place the trade when the set-up occurs. The fear is removed from the trade because they know that several losers in a row is to be expected.
2. Once a trade is entered it immediately moves against the trader. The unsuccessful trader will fear that they have made a mistake. They fear making another loss so they wait and hope that the market moves back in their favour. The fear of taking another loss now controls their trading decisions, they might move their stop further out so the market doesn't take them out for a loss. They might ignore the trade, hoping that it will get back to at least breakeven - the daytrade becomes a position trade of a few days and then it becomes a long term 'buy and hold' strategy.
The successful trader, of course, will know from extensive testing of his system that such trades happen and that the trade might come round or it might hit the stop. His stop is in place and it will remain in place - the system dictates where the stop is, not the trader's fears.
3. Once a trade is entered it immediately moves strongly in the traders favour. The unsuccessful trader will suddenly see a villa in the sun or a new sports car flashing before his eyes. This trade is going to the moon so he removes his price target and decides to let it go. Greed has now completely taken over his trading decisions and the previous plan (if any) is ignored. Of course, markets rarely move in one direction for long and when the market turns the greed turns to fear as the dream slips away and the trader tries to hold on until the price gets back to where it was. The daytrade becomes a position trade...
The successful trader has set a target, either a certain price or a timed exit and will stick to it. If the trade only takes 5 minutes then that's just great, there's plenty that won't.
Fear and greed are human emotions - we can't do anything about that. But, when it comes to trading we need a way to control those emotions. Here's a few tips:
1. Know your system. If you have confidence in your system this helps to override those feelings of fear and greed. Confidence can only come from designing and extensively testing your own ideas. You can never be fully confident when you rely on someone else's tips or signals.
2. Automate your system. Computers do not suffer from fear and greed, they won't hold onto a loser praying for a miracle or screaming at the screen that the market is wrong - they'll just cut it if that is what the system says to do.
3. Money management. Quite simply, no matter how good your system you must only risk a sensible amount - and always money you can afford to lose.
Tim Wreford runs Online Futures Trading, a website that provides information and resources for traders. Tim also provides a free day trading system, the results of which are updated daily on the site.
MORE RESOURCES updated Thu. September / 24 / 2020
How Forex Trading Works Market Realist
Inside the weird new world of social ‘forex’ trading—where you sign up friends, and some report risky red flags for investors - Fortune
Inside the weird new world of social ‘forex’ trading—where you sign up friends, and some report risky red flags for investors Fortune
Proven Forex Trading Strategies for Beginners The FINANCIAL
Beware! That 'forex trading' may be a scam Nairametrics
USD/INR Trading: Learn how to trade Sakshi English
Your guide to investing in Forex in 2020 | New Zimbabwe.com
Investors debate whether currencies can replace role of bonds in a zero interest-rate world - MarketWatch
Investors debate whether currencies can replace role of bonds in a zero interest-rate world MarketWatch
Is Forex trading legal in Nigeria? Nairametrics
How Can You Gain the Most From Trading Forex in 2020 South Florida Reporter
Why currency traders are now buying US dollars Nairametrics
Bureau De Change Operators Begs CBN to Approve Electronic Forex Trading Investors King Ltd
AUD/USD Forex Signal: Aussie Hit Hard DailyForex.com
Foreign Exchange Money Transfers For Expats iExpats.com
They made millions playing for the Maple Leafs. The CRA alleges they participated in a 'sham' to skirt paying their fair share of taxes - Toronto Star
They made millions playing for the Maple Leafs. The CRA alleges they participated in a 'sham' to skirt paying their fair share of taxes Toronto Star
GBP/USD Forecast: Shows Stability When Others Fail DailyForex.com
Forex Trading apps - TechStory Techstory
GBP/USD Forex Signal: Very Bearish to 1.2650 DailyForex.com
GBPCHF To Give Another Attempt at 1.20 as the SNB Keeps Intervening in the FX Market - InvestingCube
Discover the most popular Forex strategies in South Africa Live Insurance News
USD/JPY Forex Signal: Bullish Bounce at 104.00 DailyForex.com
USD/INR: Rupee & Domestic Equities Fall Currency Live
USD/PKR: Rupee Trades Under Pressure Currency Live
Wealth Simple Establishes Its Digital Currency Exchange Live Bitcoin News
Pound to Euro (GBP/EUR) Exchange Rate Edges Higher as the Bank of England Rules Out Negative Interest Rates - TorFX News
Pound to Euro (GBP/EUR) Exchange Rate Edges Higher as the Bank of England Rules Out Negative Interest Rates TorFX News
USD/CAD holds mild gains ahead of US PMIs Currency Live
Forex Brokers: Are They a Scam? | Investing | US News U.S News & World Report Money
Everything To Know About Getting Into Forex Trading GQ Australia
A guide to forex trading instruments The Boca Raton Tribune
What is Forex Trading? How to Trade Online Securities.io
EUR/USD Technical Analysis: Testing Lowest Level in 2 Months DailyForex.com