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The psyche of a trader: The importance of ignoring fear and greed

by , 24 January 2014

When a lot of people trade, they're looking for a handful of big winners that could leave them laughing all the way to the bank. But the truth of the matter is most traders find it hard to fight their inner fear and greed demons. By listening to these two emotions, you're going to lose money. If you can ignore these two factors, you're well on your way to becoming a more successful trader. Read on to discover the impact of fear and greed on your trading…

With the prospect of big gains when you trade, it’s crucial you manage your emotions, the team of experts at FSP Invest in The Ultimate Guide to Trading Contracts for Difference Report explain…

Many traders overlook the importance of employing sound psychology when trading, but it’s of the utmost importance.

The major emotions that impact your trading decisions are fear and greed.

You have to master your emotional responses, and add in some patience and discipline to trade successfully.

You also have to appreciate that you can’t control the market. You can only hope to go with the flow.

Don’t let greed get the better of you

When you are in a position, greed might swing your selling decision and encourage you to hold the position far longer than you should.

Another risky move is adding to a winning position.

Both these scenarios can result in disaster.

If you add to your position size, you’re continually increasing the average price. If the market suddenly moves against your position, you could close out your position with a much smaller profit than you should.

There’s also the chance of your winning position becoming a losing one.

Don’t succumb to fear

Never make a trading decision based on fear. You will most probably regret it.

You are more likely to do this if you believe you’ve missed a big market move. You might rush into a trade, paying a much higher price, which could end up losing you money.

A major concern when trading is fear of a loss. That’s why it’s essential you use stop losses. With geared trading, you can’t afford to let your losses run. You need to be able to quantify and accept them.

So there you have it, the impact of fear and greed on your trading.

The psyche of a trader: The importance of ignoring fear and greed
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