Greed Control Tips Explain, By Forex Forum
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 trading success.
Where does greed come from?The phase of popularity through which trading passes today is undoubtedly beneficial for the development of the sphere. At the same time, it has a downside: inflated expectations and unrealistic ideas about the trading process. The popularization of trading through the narratives of quick success and incredible earnings in the short term has pushed many people to a distorted perception of this area. Now, a significant percentage of newcomers expect that they will be able to quickly and easily earn huge sums of money without effort, relying purely on luck and good fortune.
In this state of mind, it is easy to lose your head from the first profits (which can really be the result of one-time luck) and fall into the abyss of greed. It encourages people to strive to increase their profits all the time, not appreciating the intermediate results, not being satisfied with what has been achieved, and not taking into account any risks or other factors that affect the trading process. And while many may argue that this characteristic is rather individual, affecting particular persons, it is still possible to follow a recurring pattern of its manifestation in many novice traders.
Examples of greed in trade:
- "Doubling" unprofitable transactions
- Adding capital to winning positions
- Excess leverage
Greed can change your mental state by using your attention to maximize usefulness / happiness / wealth. The pursuit of these things often results in traders posting trades that they would otherwise never have thought of.
Once greed drives your forex emotions, you lose focus and abandon all of your trading plans.
Winning is good! But the euphoria of winning consecutively in forex trading may catalyze a craving for more and more money leading to extreme greed.
This excessive greed often causes a false sense of being in control, as it makes you less careful.
Is greed an emotion? To answer this question requires us to understand greed and the dangers associated with it.
Some risks associated with forex greed include chasing markets, over trading, and over holding on to forex trade.
Forex greed is egotistical and too much desire to get lots and lots of money from forex trading.
How greed works in forex trading
Greedy people might not recognise their own greed. To them, their actions are completely normal, logical even. They wouldn't have it any other way.
There are many different ways greed can infect your forex trading. Some might say that there is no place for greed in forex trading, that it has no benefit at all.
- Greedy traders don't set limits
- Greedy traders trade too much
- Greedy traders risk far too much
- Greedy traders can risk too little
If you really want to control your greed while trading, then you should join a forex forum. Inside a forex forum, forex experts share their valuable trading experience and knowledge. Which will be really helpful for new traders who want to improve their trading skill.
Here are some tips how traders can control their greed while trading:
1. Recognize That There Are No Shortcuts
Many people enter trading with the aim of accumulating wealth in a short span of time. This misconception is fuelled by success stories that draw media attention. You may have read about Tim Sykes, who began trading when he was in high school and made his first million by the time he turned 21! Sounds terrific, right? But what many of us miss is that Sykes achieved this by trading judiciously and even making mistakes, losing money and tweaking his strategy.
2. HAVE A TRADING PLAN
A trading plan contains the guidelines and rules you can follow to trade.
It tells you, when to enter a trade, how to manage a trade as well as how to exit.
Once you have these guidelines to follow, some how it will stick to mind that it is the right thing to do. In that case, your emotions will never determine your trading decisions.
3. Don't forget to manage risk
Many traders try to take very high leverage and put a large amount in the hope of getting more money in return. If you want to make a huge amount of money with a less size of trading account then it will be very dangerous for you. Before you put any trade don't forget to set a very strong risk management plan in your trade. If you can keep setting the trade without proper risk management, you will soon find yourself out of the market with zero money. By maintaining proper risk management you will be able to lower your greed.
4. Track your emotional state
You must always know what and why you are feeling. If you feel that you have lost emotional balance, pause for a while. It will be wise to stay away from the market for a short while after a series of losing or profitable trades. Such series can provoke strong emotions that might harm your trading. Hence, you should stop and calm down before carrying on with your work in your normal balanced state of mind.
5. Have a clear entry criteria
Your entry criteria have to be very clear, such that a 12-year-old can execute it. There should be no room for guesswork, else your greed will push you to start entering the market at random while thinking that you are following your strategy. And this can spell doom for your trading account.
6. Never do over-trading
It is one of the biggest mistakes the traders do out of greed, mainly the new traders want to make money fast and start over-trading, and after a few of their over-trades, they find themselves with zero money in their account. The more you will give importance to the money rather than the processes and consistency the fast you will lose your trading account. Over-trading will always lead you towards failure, so never trade in the market in the greed of making money fast.
7. PRACTICE SELF DISCIPLINE
You have to be able to tell yourself when to stop trading or even if it means no trades at all for some days.
Having a series of technical rules to follow greatly helps but you still need to have the discipline to stick with them.
You must learn to accept that success and failure are both part of trading.
Once you have learnt to accept a failed trade like you do for a winning trade, you will be able to learn from your mistakes.
8. Manage Open Positions with Take Profit Orders
Most traders place stop-loss orders to prevent excessive losses. Stop-loss orders get automatically executed if the price of an instrument falls to a pre-specified level, limiting the trader's loss on a position. While this is common, it is not so common to place take profit orders, which is also an important element of risk management when trading. Learn more about stop loss and take profit click here...
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