Forex trading is often referred to as an emotional rollercoaster ride due to the ups and downs of various emotions that humans can experience while trading. When we’re winning, we feel excited or on top of the world and may never want to stop. When we’re down, we might feel anxious, afraid, or depressed. Although our thoughts on these emotions might be black in white, for example, excitement is usually regarded as a good emotion, these feelings can all have negative influences on our trades. This is because someone that is feeling excited might keep going when they should stop, thus resulting in a loss. Today, we will talk about the way greed can influence our trades.
Greed could be considered a mixed bag when it comes to positive and negative outcomes. The truth is that greed mostly has a negative influence on our trading decisions, although it is associated with ‘riding the wave’ in trading. This is a common tactic that can be highly rewarding, as long as one knows when to get out. It only works in highly volatile trending markets and can be done using various indicators or with some background knowledge. Traders generally label this strategy as greedy, and this can be one of the only benefits of being greedy in the forex market. However, many greedy traders do not know when it’s the right time to get out of the trade because they are always looking to make the most profit possible.
Most professionals will tell you that there’s nothing good about getting greedy when you’re trading. Many of these seasoned traders have experienced the devastating effects of the emotion firsthand, so they want to pass along this lesson to save others from its devastating effects. Here are some of the negative ways that greed can interfere with your trading:
- Greedy traders risk too much because they are often seeking a big return. This can backfire and result in a large loss instead. These traders might ignore their take profit levels and fail to exit trades when they previously planned to.
- A greedy trader might miss out on one opportunity and want to make more the next time around, only to end up with a loss.
- Greedy traders never feel as though they have accomplished enough. Rather than congratulating themselves for a job well done, they feel the need to keep going.
- A greedy trader often focuses on making profits in general and might fail to think far enough ahead.
- Some greedy traders set limits but deviate from those limits once greed takes over.
- A greedy trader might trade too much out of a constant fear of what they’re missing. This is also known as ‘overtrading’. A good trader knows when to step back and take a break. Sometimes, the best move is doing nothing.
As you can see, greed can really interfere with our trades and cause one to keep going past their take profit level, only to lose in the end. A trader might get lucky a few times doing this, but this tactic is too close to gambling and is bound to cause more losses than gains in the end. Trading too much, or overtrading, is not a good move if you want to be successful. Many greedy traders might not realize that they are making these mistakes. In fact, they probably feel that they are making logical decisions. This is why it’s important to recognize this emotion and how it can hinder you before you begin.
If you’re already trading and feel that greed is affecting you, take a step back and look at the big picture so that you can focus on solving the problem. Sure, greed is associated with riding the wave, which can be highly profitable for some traders, but this emotion causes more harm than good. Always try to be vigilant about the ways that greed might be affecting your trades and invest some time into learning about trading psychology if you haven’t yet.