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Fear and Greed of Forex Trading

Fear and Greed are two emotions that must be controlled. The forex beginners will have a lot to do with these  emotions. When we read about the money a trader can theoretically make by trading forex he/she thinks about nothing but making a lot of money. However, forex trading is not gambling but it is not science either. Think about forex as a intelligent card game like bridge. There is a random factor in this game, but still the winners are those who have experience and follow some strategy. The thin like between gambling and executing your strategy should never be crossed. Many beginners succeed to have some good trades in their demo accounts at the beginning. So, they open a live account and invsest real money. As soon as they start trading they see the other side of forex trading and forex market. On the very basic level, when they win, they are greedy and want more, when they lose the greed will be replaced by fear. And so they swing between fear and greed like a pendulum.

Sometimes they are fearful and sometimes they are greedy. When they have a losing trade, their fear show up and when they have a successful trade, their greed takes the control. When they are greedy, they are overconfident and when they are fearful they have no confidence and so they just watch the market and don’t dare to take any position even when there is a good trade setup. Many beginners will give up at this point and so they lose a great opportunity of making money through forex trading for the rest of their lives. Does it always have to be like this?  Can a new trader pass this stage and come able to control the emotions?  Below are some ways to deal with the pendulum stage

  • Spend a few months learning the forex market and forex trading basics.
  • Learn trading techniques and  trading systems. Study tutorials and ask good traders for advice. Make sure that he/she is a real trader because there are many people who introduce themselves as good and great traders, but they have never been profitable in reality. So be careful.
  • After finding a good and reliable trading system taught by an experienced forex trader, you need to try the system on the demo account at least for few months. You should forget that you are demo trading and you should treat your account as a live account. Only in this case you can built the required confidence. Otherwise you will do nothing but gambling developing bad trading habits. When you succeed to trade profitably for few months consecutively, you can open a live account and start trading with a small amount of money. You need to rebuild your confidence with your live account again. Trade with a small amount of money and when you succeed to trade profitably for few months, you can increase the amount.

 If you follow the above stages, the swings between fear and greed will never interfere in your trading, because you will not give them any chance to do this.

Greed can not take the control, because you do not start with trading a lot of money and fear will not show up because you do not lose your confidence because of losing  lots of money.

Of course it is not that simple.  Forex trading has never been black and white. The psychology of trading includes very complicated emotions. Some traders may even secretly want to lose (self-hate). However, on the very basic level the pendulum of greed and fear must be considered and analyzed.   

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