Finance

Fear and greed as demon of trading psychology

Greed and fear are some of the demons of the trading psychology that forex traders at cfd trading South Africa do face and it might be good if you knew more about them:

Greed

The demon of greed is the first enemy that forex traders do face. It is a demon which has a spiky and long tongue that whispers constantly to your ears that the market opportunities will go away unless you ensure that you act fast to profit out of them. its feet are normally on fire, screaming to you to be faster in trading, stressing you, causing you to lose your focus. It has a belly which is completely empty, emaciated, hungry and weak, as none of its exhortations for the greed and speed leads to the slightest profit at the end of it all.

It might be natural that the majority of the forex traders happen to be money-oriented, individuals who are out in search of profits, attaching more importance to their financial success. It is something real which minus a drive that is strong for money making, there is no trader that will tolerate the forex market trading pressures, in amounts that are moderate, the drive in achieving the monetary gains and having a focus on financial gains are necessary and quite healthy.

But the healthy impulses at one point become unhealthy when they try directing your trading decisions. The greed demon requires knowing its place, and they need not to interfere in your trading practices which have to be formulated by the logic only.

The first step in conquering greed is to ensure that you embrace an approach of discipline to trading which then minimizes the role of impulse in trading decisions. When you come up with a trading strategy at the start, and remain loyal to it throughout the trade course, you ensure that greed has nothing to do with your strategy and it will be silenced. You will be able to study the markets and make your decisions based on analysis and reason alone.

Fear

It has a sight which is fearsome and a sharp voice that will bellow growl all the time trying to intimidate you into indecision in everything that you work on. Fear when it comes to its role, is opposite of greed, in terms of your decision for trading.

Instead of having to inspire you to trade very fast, closing and opening positions with speed, fear makes you to think that, nothing that you do is going to be profitable in the long run, regardless of the power of your analysis and the study that you place into it as well as the consideration gone in perfecting your method.

In such a case, a fearful trader may not be able to wait for the profit position realization, and you will be unwilling to act on the rational expectation’s basis. Additionally, the fearful trader  will be unable in realizing losses that result from assumptions which have been mistaken and the red ink in their account will continue to spread everywhere because of that. The outcome is normally ruining. Fear leads to more irrational decisions and few trades happen to be profitable, few losing trades that are long held will end up wiping out the account.

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