What are Fear and Greed in Forex Trading?
Fear and greed are simple concepts to understand, and they are intertwined in the majority of Forex traders psyche. Everyone gets into Forex trading to make money, but the fact is the majority of forex traders lose money. Not being able to control fear and greed in forex trading will cause traders to trade emotionally and make wrong trading decisions, which ultimately lose them money in the markets.
Control Fear and Greed in Forex Trading
Control Fear in Forex Trading
There are many types of fear in trading, but the fear of losing money is the biggest one. Depending on type some traders will be more prone to fear than others. If you have a fear of losing money, you can reduce fear in three ways.
Click on below video: Overcoming the Fear of Loss
1. Reduce Your Lot Size
If you are trading with a lot size that you are not comfortable with fear is greater, and chances of making a wrong emotional decision are higher if you are trading in this way.
2. Set Your Stop Loss on Every Trade
Knowing how much you are prepared to lose on every trade will help you overcome with fear. No one wants to lose their money, but if you know your potential loss, and you are comfortable with that, you will not be trading emotionally and making wrong decisions.
3. Understand the Forex Market
This is the biggest fear of all in my opinion and the difficult one to overcome. Lack of knowledge is the major reason why traders fail and are the difference between the 5% and 95%. Some traders think they understand what they are doing, but the truth is they don’t. You have to fully understand what is going on in the market to become a successful Forex trader, and that understanding will overcome your fear.
Control Greed in Forex Trading
Greed also plays a big part in the success or failure of a forex trader. Various types of greed in trading that will attribute to your failure as a trader, but the main one is trying to make money on every move in the market. That will cause you to chase after market moves and over trade, and if you are chasing the market and overtrading, you are trading emotionally, and you will lose money. Below are some tips that help you to use to overcome greed.
Click on below video: Controlling Greed When Trading
1. Make Pips Not Money
It will not count how much money you make, its only count how many pips you make. If you are trading 50 lots per pip, you can make £3000 per week just from 10 pips. So don’t get greedy and chase after the big profit every week, on making pips. When you are consistently making pips, week in week out, then you can increase your lot size to make the big profit.
2. Be Realistic With Your Expectations
You cannot make money from every market move so learn to accept it. You have to satisfy with the pips you make and not get frustrated by the pips you miss out because that will cause you to trade emotionally and chase after missed pips.
Click on below video: Managing Emotions in Trading
3. Learn to Trade
Most of the traders will try to make money first and then learn to trade after they have lost a lot of money. Which does not make a great deal of sense, but that’s what happens. The majority of traders take training after losing a lot of money in the markets.
Knowing how to control fear and greed in Forex trading will help you to become a good trader, but the biggest obstacle to overcoming from fear and greed is a lack of knowledge. Trading is not easy, but understanding the market will help you to control your fear and greed in trading, and make you a profitable trader.