Forex Psychology

Greed: The Most Dangerous Emotion to Feel While Trading

When just starting out, one of the many warnings that people seem to get is to not be greedy, in fact, a lot of mistakes that are made from both the new and experienced can have an aspect of greed in it, but what exactly is greed?

Greed is basically a “selfish and excessive desire for more of something than is needed” as stated by the Merriam-Webster dictionary. If you think back into your life, I am sure that you will be able to see times where this definition matches your own experiences, in fact, you may have experienced it a large number of times, often it can be a subconscious thing, making decisions without us even knowing, other times it can be an aim, not a good one, but it is still an aim.

Now greed by itself is not necessarily a bad thing, it involves the desire to gain more, to achieve more which is often a good form of motivation, where things go wrong is when this want for more becomes excessive when you do not have a limit to how much you want and so you keep pushing yourself for more and more and it can eventually push you to do things that you would never have done before and that is way outside your strategies boundaries.

So what exactly are the dangers of it? Greed is a very strong emotion that can prompt you to take actions that you would never have otherwise taken when we are looking at trading, this would come in the form of creating additional trades, larger trade sizes than usual or chasing the markets in order to either make more or to win back some of your previous losses. It can cloud your judgment and take you off the path that you have been working on for so long.

So we know what it is, and we know why it is bad, so how do we get over it? How do we suppress that emotion? It can be done, but it will take effort and discipline to do, its not easy, but once done, it will make your trading far safer and far more successful.

The first thing you need to do is take a hit to your ego, you need to have an understanding that you aren’t always right, you have your strategy with its criteria for a reason, if you were always right, you would not need that at all, and you know what? That is a good thing, you won’t always catch the movement of the entire market and you may miss out setups altogether, it is important to recognise that as when it happens, you still need to move on and concentrate on the next trade and not look back in regret.

That is a part of trading, losses and missed trades are as much a part of trading as winning is, looking at your strategy, in the long run, you can make a lot, but greed will tell you to make a lot now and worry about the future tomorrow, not a good tactic if that greedy trade causes you to lose the last months profits. Being able to forget the previous trades and just look forward is a way of preventing yourself from being influenced by our greed and making unnecessary and dangerous trades.

One way that some people prevent greed from coming in is to convince themself that they are more lucky than skilled when it comes to trading, so they do not have the belief that they can just put in trades and win, instead they need to ensure that they follow their strategies and entry criteria in order to trade, something that helps prevent them from making additional unnecessary trades. So ultimately, you need to look to the future, concentrate on your strategy, and avoid those additional trades.

Forex Psychology

Taking the Emotions Out Of Trading

Emotions can be some of the most powerful things that you can experience in life, they are what some would describe as the things that make us who we are and what makes us human. As they are a large part of us, it is often strange when people say that you need to be able to remove your emotions when trading, but they are a part of us, so that can’t be an easy thing to do.

Let’s get one thing straight to begin with, when we are talking about taking your emotions out of trading, we are not meaning that you need to sit there like a roto and to have no emotions or feelings while you trade, that is not feasible and not possible, what we are talking about is all about your decision-making process and the trades that you make, keeping your emotions out of those decisions so no rash actions are made.

There are a number of different emotions that can be very dangerous to your trading, these are things that you should be avoiding at all costs as they could potentially destroy your strategy and any risk management that you have put in place. The first of those is greed and the second is overconfidence. Greed often comes from losses, make a loss or two in a row and you want to win it back, it can also come from wins, you have a win and then want more so you decide to increase your risks and trade larger sizes. Overconfidence has a very similar effect, you have made a few good trades and so you think that you have the secret key, anything you do will win and so you increase the risk, the trade sizes and then no longer pay attention to your strategy and just trade what you think, I am sure you can work out the end results of trading in this style.

So how do we get rid of those two very powerful yet devastating emotions, the fact is that you won’t be able to, you will always have some of those feelings and you may always want to earn more, but what is important is that you are able to get around them, having your trading plan there in front of you each time that you trade will allow you to remind yourself that you need to stick to it, you need to stick to the risk management plan that you have created in order to keep your accounts safe. If you have ever gone against it and made a loss, keep that in your mind and keep a reminder of it near your trading platform, this way you can remind yourself about what can go wrong should you go against your plan.

Creating a routine for yourself can help create the idea of a system for you to follow, having these rules and requirements for the things that you do when trading will help you to be more autonomous, doing what is required and not having to think about things too much. Removing this aspect of thinking out of your trading will give you less chance to develop ideas or to develop stronger emotions towards the trading that you are doing. It also helps you to stay focused and to avoid certain distractions that would otherwise take your attention away from your trading.

One of the things that emotions can cause is a bias towards certain conditions in the markets or ideas that the market will move a certain way. While getting to these conclusions through analysis is positive, emotions can often cause you to believe that they will happen regardless of what the analysis says, sometimes even when the analysis is saying the opposite. This is where you need to ensure that any decisions and trades that you make are based on the facts and the analysis that is available, not on what you think will happen, doing it this way and getting something right can lead to overconfidence and we have already discussed why that is a bad emotion to have.

Staying committed and dedicated to your trading plan is another way to avoid letting your emotions get the better of your trading. You need to stick with it, sometimes it can be hard, especially when things are not going the right way, but you created that plan for a reason and you created it because you know it can work. So you need to be able to stick with it through the good and bad times, only this way can you be sure that you will be able to keep it profitable.

Keeping your emotions out of trading is not easy, in fact, it is one of the hardest things to do when trading, you will want to jump with joy with a win and throw your computer out the window with a loss, but if you are able to control the emotions, stick to your plan, you will be able to be far more successful at trading than if you were to et those pesky emotions get the better of you.

Forex Psychology

Self-Motivation and Self-Discipline In Trading

Motivation and discipline, some incredibly important traits that you need to have in order to be a successful trader. You often hear that trading can be quite a demoralising experience, especially when things aren’t quite going to plan, so we are going to look at some of the reasons why you need to be able to self-motivate and self-discipline yourself and different ways that you could potentially go about doing it.

Firstly, let’s look at why motivation is so important. Motivation is defined as “a reason or reasons for acting or behaving in a particular way.”. This is all based around the way that you behave, someone with low levels of motivation will be a lot slower, less engaged, and offer much lower levels of productivity to someone who is highly motivated, putting in a lot of work, getting things done quickly and ultimately enjoying what it is that they are doing.

Motivation can be a very powerful feeling and something that can make you either successful or unsuccessful. The problem with trading is that you are all by yourself, this means that there is no one else around to motivate you. In a regular job (most not all), there will be a manager or a team leader around, one of the jobs that they have been employed to do is to help motivate those around them, to motivate their team to work hard. Without that person around, it is now down to you to do that job for yourself, and this can quite often be a lot harder to do than it is to say.

Think about the ways that you can motivate yourself, what is it that gets you going? For some, it is simply the idea that they can make some money at the end of it, but this is more of a motivational goal, rather than a way of keeping yourself motivated. When you have been at the computer for a number of hours, not much has happened or you have read over some new learning for the third time. It’s boring, you want to stop, how’d you motivate yourself to carry on?

People do this in entirely different ways and it will work differently for different people. Something that you may want to try is to set yourself little goals, these can be daily, weekly or monthly targets that you want to meet. Should you achieve them, then reward yourself with a little something extra, an extra cake, those trainers you wanted, it could be anything but it must be something that you desire, and it must be something that you are willing to go without should you not achieve those targets.

Other ways of increasing your motivational levels are to add a little bit of variety into your learning and your trading, and not to pressure yourself into always be trading. Of course, that will be boring and will cause your productivity levels to really drop, instead, try to change things up, try not to do the same thing for more than one day or two days in a row. This will keep things fresh and you will continue to learn and to be productive in your trading. It can also be important to talk to others, being by yourself lonely and this can bore even the most motivated of people. It is important that you manage to get out and talk to others, talk about anything. It doesn’t need to be just about trading, this interaction can break up the monotony of trading.

We talked about speaking to others. If we take this a ste[p further, a good way of motivating yourself can be by talking with other traders, people who are going through the same thing as you. You can talk about your plans, your results and compare how people are getting on. This can go one of two ways and it will depend on your personality as to whether this is a good idea. If you decide to compare your results with others and you are doing well, this can motivate you to keep working hard. However, if you see your results and you are not doing as well as the majority of others it can either cause you to lose a lot of your motivation as you feel that you are not doing as well, or it can motivate you to work hard to achieve the same as them. This Is entirely down to your own personality, if you are the sort of person to become disheartened then we would suggest not comparing results. If you are the sort of person where it drives you to work harder, then it can be a fantastic motivation builder

So we know a bit about motivation, but what about discipline? Discipline is defined as “the practice of training people to obey rules or a code of behaviour, using punishment to correct disobedience.”. This is often another aspect of a job that is given to a manager or a team leader, but trading by yourself, you are required to take on this role and need to have the ability to discipline yourself should you do something wrong or should your performance levels drop.

When you are working for someone they will be there monitoring your progress and the work that you are doing, trading at home, you do not have someone there to do that, so you will need to do it for yourself. This can be far harder than it seems, as many people automatically assume that they are doing better than they actually are, in fact, the majority of people feel that they are doing far better than they actually are.

The first thing that you are going to need to do is to work out how you are able to assess how well you are doing, this can be done in a number of different ways. Initially, you will need to set some targets and goals that you want to achieve, these can then be used as the overall target that you will measure your progress and performance on. They need to be realistic and achievable, as setting targets too high, will only result in you missing the and then feeling demotivated.

You will also need to think of some potential sanctions should you not be performing to the standard that you feel that you should be or if you are falling far short from your targets. This could simply be something like putting $10 into a saving pot that you can only access once you reach your goals, or that you don’t get that slice of cake that you usually have after a meal, this is all about ensuring that you keep your performance levels up. It can be very difficult to self-discipline yourself.

While what we are talking about is what you do yourself, if you are living with a family member, you could ask them to keep track of your targets and to see how you are getting on it’s not quite self-discipline but it works well for those that are not able to control and discipline themselves.

Self-motivating and self-disciplining is not an easy task and can be very difficult for a lot of people. However, getting it right can make working by yourself and trading by yourself very rewarding and can build up your abilities as an individual and as a leader. If you have what it takes then it can create a fantastic at home trading career.

Forex Psychology

Can Stress Be A Positive When Trading Forex?

You no doubt would have heard people tell you about how bad stress is in trading, how stress is one of the worst feelings that you can have and you should do whatever you can to try and avoid stress completely or ways to help reduce it. However, could stress actually be a positive thing, could it actually help you when trading?

Stress can cause people to break down, it can reduce your attention and can make you make some bad decisions, especially when it comes to trading, however, in life, stress can actually be a good thing, stress is what gives you your fight or flight survival instincts and if you did not have it, you would probably be dead by now, stress will literally save your life.

The problem is that different people will react to stress in completely different ways, stress is like an injection of energy and feelings into your brain, it can make you freeze in place, it can make you jump out the way and it can completely confuse you, what it does to you depends on who you are and so for some, it can be a massive positive, but for others, it can be a disaster waiting to happen.

Before we get into some of the positives of stress, stress ultimately will cause you to automatically make some decisions, which you can imagine that when you are trading, it may not be the best scenario. So when people tell you that when trading you should be trying to avoid stress, you should believe them, while it does have some positives, trading is not something that you want to be making quick and rash decisions when doing, so when you are feeling stressed, if you do not react the right way naturally, try and avoid it completely.

We mentioned above about the fight or flight reaction that people have with stress, there is also the third thing that could happen, you could freeze in place, much like a deer does when it sees the headlights of an oncoming car, the deer freezes as a defense mechanism, although in this scenario it is actually the worst thing that it can do, that is what it has trained itself to do.

Think back to the last time you were in a scary situation, how did you react? Did you try to get away from the situation (run) or did you try to overcome it (fight)? This would be your natural reaction to stress, this is not a trained reaction, this is just6 how your brain automatically reacts to it, but how is this helpful for trading? Depending on your reaction, or your ability to train your reaction, we can use stress to really focus your mind on the thing that is causing it, finding ways to overcome it, rather than avoiding it.

It is important to understand that stress is a part of trading, it will always be there and will be impossible to avoid it completely, it will most likely rear its head when you make a loss, and you will make losses as they are a major part of trading. The thing that we need to do is to train ourselves to use that stress to our advantage. We want to use that stress to focus our mind and to calmly resolve the issues rather than freezing or panicking when something happens which can lead to rash uncalculated decisions and trades.

So now that you have a basic understanding of what stress can do and that losing and stress are unavoidable parts of trading, what do you do with this information? We need to be able to train your mind to react in a certain way when you start to feel some trading stress, a way to avoid making rash decisions, and instead focusing yourself on the issue that is causing the stress.

When we mention reacting to the stress, it does not necessarily mean taking action, for many of us, the best scenario would be to avoid stress entirely, or when it does start to show its ugly head, we are able to get out the way, so being able to recognise those signs is, in fact, a reaction to it, you need to get a good understanding of exactly what stress looks and feels like to you, this will enable you to know when it is starting to approach and will give you time to react accordingly.

For many, simply getting rid of it is perfect, when you start to feel it coming, use that as your time for a break, you always need breaks, so there is no better time to take one, it will give you a break and also help to remove any causes of stress at that point in time.

For those that thrive on stress, you need to use it to focus on whatever is the source, if it is low, use that time to learn why you lost, look at your journal or your trade history, getting an understanding of why something caused you stress will enable you to better understand it and have an understanding of why something happened often enables you to better deal with it in the future should it happen again.

Stress is not an easy emotion to deal with, but it is something that you will come across a lot when trading, in fact, it will be one of the most seen emotions, it is caused by losses, by the markets not moving the way you want it to, money issues, and even a lack of trades. There are many things that can cause it, what is important is how you deal with it, if you freeze or simply begin taking trades without thinking about it, it will only lead to more losses. You need to be able to control it, remove it, or use it to your advantage and focus your mind on the task at hand. Whatever works best for you, it is just important that it is under control, and you do not let this very powerful emotion and feeling get the better of you.