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
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
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
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"Is it important to be creative in your trading?" I'm not
sure I can describe it in terms of importance. The creative
process is somewhat of a mystery, even to scientists who
What is Forex
Forex, or Foreign Exchange, is the simultaneous exchange of
one country's currency for that of another. The way it works
is an investor who wishes to purchase or sell one currency
for another with the hope of making a profit when the value
of the currencies change in favor of the investor.
A Fools Game
I received an email this week with a question (below) which
caused me to think about the wisdom of pursuing trading as
a career. Regardless of your trading time span, the skills
and concerns of active short-term trading are relevant to
all market particpipants.
Forex Signal, Forex
There are lot's of Forex signals providers out there. New
Forex traders might be thinking of looking for a reliable
Forex signals provider.
ISO 4217 in Forex
ISO 4217 is an international standard describing three
letter codes to define the names of currencies established
by the International Organization for Standardization
(ISO).The first two letters of the code are the two letters
of ISO 3166-1 alpha-2 country codes (which are similar to
those used for national top-level domains on the internet)
and the third is usually the initial of the currency
I read on a bulletin board a traders comment that on his
first outing trading the E-Mini S&P 500 he lost on each
of his trades. He noted though, that had he had a wider
stop each of his trades would have been profitable and that
therefore he would be trading with a wider stop in future.
Facts of Day
Are you thinking of entering the fast-paced world of day
trading? Arm yourselves with the information from this fact
sheet on day trading.What is day trading?Day trading is an
investment tactic that does online daily stock trading with
a relatively short investment.
The Meaning of FOREX
Price Charts and How to Use Them
There is one very important factor that you should consider
with great care if you are willing to become a successful,
profitable Forex trader. This ever important factor that
must be always present in the trader's portfolio, is the
ability to read the charts.
Two Timeless Rules in
RULE #1) ~ Cut your losers; let your winners ride. One
important thing that every new trader must know before
entering this highly profitable business is that life is
not perfect, even in FOREX land, and you should always know
one fact: YOU WILL HAVE LOSING TRADES.
An Evaluation of the
A Minister of Finance is morally right to lie about a
forthcoming devaluation and a woman has the right to lie
about her age. This is the common wisdom.
Forex Options Market
The forex options market started as an over-the-counter
(OTC) financial vehicle for large banks, financial
institutions and large international corporations to hedge
against foreign currency exposure. Like the forex spot
market, the forex options market is considered an
How To Choose Wisely A
Most traders use a FOREX broker to handle their
transactions. What exactly are brokers? Strictly speaking,
brokers are individuals or companies that buy and sell
orders according the investor's decisions.
Momentum Trading: A
Practical Day Trading Strategy to Get Profits from Hot
Momentum day trading can be extremely profitable when done
Trade Exit - How To Cut
Losses And Let Profits Run
Cut your losses short and let your profits run. This is the
essence of your trade exit rules.
Chinas New Currency
The base unit for the renminbi is the yuan, which is how
the Chinese currency is most commonly referred to. The
official ISO abbreviation for the yuan is CNY, but it is
also commonly abbreviated in the forex industry as RMB.
The Secret of Reduced
One of the best kept secrets in trading is that of reduced
margin spreads. You cannot name a trading method that
provides more safety or a greater return on margin than
does a reduced margin spread, while also being one of the
least time- consuming ways to trade.
Throughout our course on futures trading, we have tried to
point out to you that there is a great difference between
having an investor attitude and being a trader. There are
also many similarities.
Be a Smarter FOREX
Currency Trader: Three Basic Principles
Below I will describe three basic principles that may come
in handy for currency traders. They are very easy to
implement and potentially take advantage of as you will
It is possible to buy and sell money from different
countries on the foreign exchange market called Forex.
Forex currency traders can profit by taking advantage of
the dips and swells in the foreign currency market.
Q1: When you consider that the foreign exchange market has
become the world's largest financial market, with over $1.5
trillion USD traded daily, where does it go from
here?A1:The FX market is unique, in the UK there is no
central exchange, we trade via the inter bank market.
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