Monday, 22 March 2010

Greed and revenge when trading forex

GREED

Most traders in the forex market try to make a zillion dollars on every trade.  They're greedy. This leads them to stay in a good trade, hoping to get more money out of it.  This can lead to disaster — the trade can move
against them and they get creamed. This happens all the time, and it still happens to me from time to
time. It's the single greatest threat in trading. But you can already understand why that's probably
true. But how do you overcome greed when trading?

REVENGE

This is the other big one. A lot of traders flush some pips down the toilet and then want to strike back. So they double their last order and go for broke. It’s like, well … it’s like reaching down into your toilet. That’s gross. And it does not make you any richer.

The impulse to get revenge is natural, and I still deal with this emotion often.  Do not underestimate this emotion. Many traders have not only reached into the toilet of revenge, but have dived into it head-first. Remember: the market is not your friend. The market is so much more powerful than you are. You cannot “get back at” the
market. Trading when angry or vengeful will be a total disaster. If you take a big loss, then stop, take a deep breath, and talk to a mentor or your mirror, or your favorite stuffed animal. Re-read the charts. 

Take a break. Chew on your toe if you have to. Even if you think you see the best opportunity in the
world after you get blasted – make sure you take a deep breath and pause before you do anything.

Source: The Currency Trader’s Handbook by Rob Booker

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