Greatest emotions – fear and greed


It's been a few months since we last wrote anything. During that time, I have seen the markets move and do all the things that we expected them to do. We looked forward with anticipation to how the market would respond to US fiscal issues and others. We saw how the news portrayed various events around the world; both good and bad. I've also had the opportunity to witness some beginner Forex traders trying to make sense of everything. There is one thing that I have seen over and over again. Beginners usually deal with their hearts, not their heads.

The key word in this lesson is emotion. Forex trading will always be full of them, the movements of the Forex Market, many times, are based on them. It is obvious that some traders are guided by feelings of their hurry to buy or sell and how it sometimes floods their plans. A common question that I have heard in the market is "Why have I ever done it or done it?"

I have often asked myself what makes us come to market when we are not fully prepared and finish prices that completely disagree with our plans. I cannot say that I know of any reason why many of us (and all beginners) do this, but I would like to suggest that there are two main reasons for that. These two reasons are greed and fear.

Greed comes when the market goes as we expected then, naturally, we want more! We somehow get the idea that it will continue for a very long time. Maybe the laws of physics haven't completely sunk it – "what's going on …" Somehow, we seem to have forgotten that everything is changing gradually.

The thing to remember is that in order to have a successful trade, you need a good strategy AND discipline to execute this strategy. No matter how good it is, trading is completely useless without properly disciplined implementation of the strategy.

The fear comes when we realize there is a surplus and we actually miss it. The second time when fear plays a role is when we think that according to the way trade can happen, we start to fear the loss of money. I have learned that until we learn to have dominion over fear and greed, our results will be very unstable. Worst yet, my biggest concern for new traders is if money management is not strong, many emotional traders will soon be out of money – long before they even had a chance to establish themselves as a legitimate trader.

So my advice to you as a beginner or advanced trader is simple; don't let your emotions control you. There is no place in the halls for successful Forex trading for individuals who cannot dominate their emotions – especially fear and greed.