Forex Trading made simple…

Fear v Greed

FEAR v GREED

Most people never consider their feelings of fear and greed. We accept them as necessary and helpful emotions that drive us to achieve successful careers and avoid the pitfalls that can threaten our existence. However when we enter the world of trading they can become severe obstacles that negatively impact our trading at best and if not controlled can ultimately destroy our finances and our family life.

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Trading in its simplest form is buying when prices are low and selling when prices are high. The challenge is how to know when prices are high or low, if it is the right time to buy or sell and taking action before the market proves your action to be correct.

What makes this even more complicated is when our emotions kick in and start to impact our trade plans and strategies.

Fear. If we have a dislike to lose or we have experienced a series of losing trades, then it can create in us a fear to enter trades for fear of losing. If we do not trade then we do not have the opportunity to make a profit. Our fear can also cause us to delay entering a trade when all the right conditions are in place so we miss the trade or are exposed to greater risk should we delay our entry.

Greed. When we enter a trade and it moves in our favour it is easy to get carried away and hope/expect it to move further and further creating bigger and bigger profit. If we allow our greed for more profit to rule what we actually see happening then we can be exposed to holding open trades that we should close and take what profit there is to be had. In these circumstances we can end up allowing a winning trade to become a losing trade.

We have experienced the “fog” of emotion that blinded our view of the market. We have not entered trades for fear of loss and have kept a trade open when we knew to take profit and watched as the price reversed. To be profitable at trading these emotions needs to be mastered.

How to Master Your Emotions

When we first started trading we were told that if we were to watch a professional trader at his trading desk we would not know if he was in a trade or not and if the trades he had open were winning or losing as professional traders show no emotion.

Is this true? As someone new to trading is it possible to trade and not feel anything? Well maybe we can explain it this way, In the hope to give you some confidence in continuing on this path to master Forex trading.

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When you were a teenager and you were near to being old enough to drive a car, how desperate were you to get behind the wheel and drive wherever you wanted? Were you going to drive the fastest sports car of your dreams and hang out with all your friends being super cool?

Then when you sat behind the wheel for your first driving lesson did you drive without thinking? For most of us the answer is NO! So what was your experience when learning to drive a car for the first time? How many times did you stall, kangaroo down the road, crunch the gears, forget to release the handbrake, pull out in front of traffic, hit the curb, break too late or too early, drift onto the other side of the road, confuse your left from your right? These are only a few challenges we faced when we learned how to drive, but we kept at it and gradually got better.

Today when you get behind the wheel do you still sweat and feel your heart start to race? Do you repeat under your breath “Mirror; Signal; Mirror”? Or like most of us do you drive without any emotion or thought towards the once complex co-ordination of actions you make every time you drive a car?

In the same way that you managed to learn how to drive a car, by following rules and repeating them even when things did not go so well, you can learn how to trade and trade without the emotions of fear and greed impacting your trade executions.

By learning trade strategies and rules, applying them in a controlled and risk free environment, following a step by step growth plan, recording your trades and reviewing them, identifying and removing/reducing losing trades. You will get better and better and ultimately master your emotions and become a Professional Forex Trader.