– Review by James Stanley, November 24, 2021
Greed is a natural human emotion that affects people to varying degrees. Unfortunately, when viewed in the context of trading, greed proved to be an obstacle more often than it helped traders.
Greed can very easily turn good deals into bad ones and bad deals into worse ones. This article provides a number of tips to control greed and how to stop it from interfering with your trade success.
What is greed in trading and how does it affect a trader’s success?
Greed can be described as a strong desire for something and is often expressed as a strong desire for wealth. This can easily get out of control when the market moves against traders, but is equally likely to negatively affect trading decisions on winning trades.
Examples of greed in trade:
- “Doubling” unprofitable deals
- Adding capital to winning positions
- Excess credit fee
Greed can change your mental state by using your attention to maximize usefulness / happiness / wealth. The desire for these things often leads traders to place trades that they would otherwise never have thought of.
In addition, greed poses a threat to the trading account. Doubling, adding too much capital to winning positions, and excessive leverage can quickly lead to a call margin or may deplete equity.
The best example of how greed affects trade
The diagram below is an example of the negative impact of greed. The chart shows the scenario when a trader enters a long position EUR / USD (without a to stop) after the big green candlehoping this market is moving higher. The market is moving lower and puts the trader in a losing position. Greed can encourage a trader not only to maintain an existing position, but also to open a new long position when the market shows signs of turning (second blue arrow).
The idea of ​​buying at this relatively low point and turning a losing deal into a winning one can overwhelm traders. In addition, such greed can blind traders to such an extent that it is possible to trade in the opposite direction trend without even noticing.
Greed is often accompanied by other emotions, for example fear. Fear appears many times in the way of a trader, so it is very important to learn how to manage fear from the beginning.
How to control greed while trading
Fortunately, greed can be controlled and overcome, like all emotions. With time and the necessary discipline, you can make deals without greed.
Greed can be seen as the opposite of discipline. Disciplined people very rarely fall into the trap of greed because they have a plan and stick to it. Trading plans and trade magazines are a great way to keep traders on the right track and not be tempted to make deals that deviate from the plan.
Traders should also consider setting strict stop loss and target number of points up before entering the deal. It’s called the attitude of risk to reward and was recognized as the most important trait of successful traders.
It is important to remember that mheal and fight greed this is not something that will be resolved over the next couple of deals. However, traders who are aware of how greed can negatively affect trading, and implement the above items within the trading regime, will take positive steps towards the goal of trading without greed.
Additional reading on emotion management while trading
TTake a look at the following resources and articles to learn more about emotions in trading and how to keep them under control to become a successful trader:
https://www.dailyfx.com/forex/fundamental/article/special_report/2021/11/28/how-to-control-greed-when-trading.html
