There are probably more emotions involved in trading, but as far as I am concerned there are only two – and the others are simply variations of one of those.

Fear and greed!

Fear keeps us out of the market when we should make an entry – and conversely keeps us in a market when we see that things are not going as planned – and we fear taking a loss.

Greed on the other hand comes into play when we are in a winning trade and do not choose to exit before the market turns around and takes back some (or all) of our profit.

Now I am sure that many of you will read this and say, “That is not true for me.” Well, dear reader, if you are a human being, I submit that it does apply to you. Experienced traders have simply learned to control it.

And one of the key elements in learning to control fear and greed is learning to lose. Yes, you read that right – “Learning to lose.”

Trading is problematical – and any trader – even the very best will have losing trades. When I say learning to lose is important, what I really mean is learning to expect losses, but not allow them it deter you in your trading efforts – providing you control the frequency and extent of those losses.

Greed is another matter – and equally hard to control. There is a time to take profits and greed should not make you stay in a trade beyond that point.

I thought about this just a few minutes ago, when a USDJPY trade hit my sell signal (not a hard coded signal but a price level that I had set in which I would reduce by exposure by 50%). When price reached that level, my trading system was telling me that the market probably had a long way to go, so I was tempted to not take my profit as I had planned – then I remembered my promise to myself: “Develop a good trading methodology and follow it.”

So I sold half my position and price continued up just as I had projected. But did I lose anything – not really. I followed my plan, took a nice profit and still profited from the continued rise in price. That is a win / win proposition. That is what trading is really all about – winning – ultimately.

 

 

 

 

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