Are you a trader who has gone through the necessary rudiments of forex trading but is still struggling to be profitable? There are traders with the best of strategies but are still unprofitable. Why? The reason surely won’t be the quality of their trading strategy but how the strategies are being executed. This article may be of great help to you. You are about to turn your trading woes into success.
Why do people go to the doctor? Usually, it is because they are not feeling well and it is taking a toll on their work output. Though they may not be able to diagnose the cause, they can tell that something is not right with them. They seek medical attention for proper diagnosis and cure.
An unsuccessful trading experience is hinged on a problem that must be identified and dealt with. One of the top reasons for failure or inconsistent profitability is the emotion called GREED. The issue of Greed will be discussed thoroughly in this article.
Robert T. Kiyosaki, a successful American businessman and author of several books on business and success once said: “People’s lives are forever controlled by two emotions: fear and greed.” Rumi also said: “Greed makes man blind and foolish, and makes him an easy prey for death.” Greed can make a trader make regrettable foolish decisions.
The tendency to focus on learning new trading strategies while ignoring the place of greed in building a robust and successful forex trading carrier is very high. Most traders think it’s all about trading strategies undermining the grave effect emotions have on their effectiveness. Many traders can’t seem to fathom the reason for the unpleasant experience of turning winning trades into losing trades, blowing accounts here and there, and funding and refunding episodes without making substantial gains.
Greed is one of the factors that can impact negatively the success of your Forex trading subtly. It is an enemy that must be identified, confronted, and dealt with to keep your trading dream alive. The get-rich-quick mentality undergirded by greed has turned many potential success stories into nothing but failures.
It is a well-known fact that only 5-10% of traders are successful. What are these people doing differently that the rest of the 90-95% aren’t doing right? It is interesting to note that these people do not even spend the amount of energy that the 90-95% unprofitable traders do. They would rather take things easy, follow the rules, and above all overcome the enemy called Greed. They are very patient and self-disciplined. It would be lovely talking about patience but for the sake of this article let’s zoom in on greed.
Greed can induce traders to forego their well-planned strategies for false impulsive and speculative actions presented by the market. They risk their capital beyond their risk tolerance leading to the making of unfounded decisions especially when market conditions are unfavorable. Their losses are magnified, and financial setbacks are amplified as a result of a get-rich-quick mentality that affords disappointment and frustration when their expectations are not met.
What is Greed?
The American Heritage Dictionary defines Greed as: “an excessive desire to acquire or possess more than what one needs or deserves, especially with respect to material wealth”. “Greed is a selfish and excessive desire for more of something (such as money) than is needed”, says the Merriam–Webster Dictionary. It is a very complex emotion that is connected to a strong belief system and other emotions. The market makers of the forex market can trigger different emotions in traders to cause traders to take the wrong positions. But this can be avoided by following the right rules. However, most traders are unable to adhere to these rules due to greed.
Signs of a Greedy Trader.
The conundrum is that most people who are controlled by greed are hardly aware. When traders are controlled by their emotions, their judgment can become clouded. Greed is particularly a dangerous emotion that can blind traders and take control of their cognitive abilities without them even realizing it. To help you identify if you are being controlled by greed, here are some signs to look out for:
- Most do not have trading strategies. Those who have do not follow them. They are most moved by their emotions to enter and exit trades.
- They usually increase their leverage and also risk almost their capital on trades especially to recoup monies lost due to lost trades
- They do not have the habit of setting take profits and also do not take their profits on time with the mind of getting more from trades.
- They trade without stop loss thinking that stop loss only limits the trader.
- They are fond of over-trading consistently. Scalpers and intraday traders are culprits. Especially after a winning trade earlier, greed pushes to open more transactions than necessary.
Negative Effects of Greed on A Trader
The negative effects of greed on the trading carrier or journey of most traders are dire. It is best to identify sooner than later to avoid the consequences over time. Some of these effects include but not limited to:
- The tendency to quit trading over time is high. Such trades do not stay long in the game. They easily fade out of the market
- The frequency of blowing accounts is higher due to the increased position sizes such traders are fond of.
- It can become a habit that is very difficult to stop. It will become the lens through which you will see everything including life.
- It fights against one of the most important virtues of successful traders known as Patience. Greed is the fuel for impatience in the forex market.
- The tendency to walk in the deception that they can have bigger returns than the other best traders who follow the rules.
- The mindset to see and think about the best sides of trade setups whilst ignoring the negative case scenarios that can lead to heavy loss.
- Greed makes traders set goals that are neither realistic nor achievable
- It causes a trader to pay attention to the amount of money that can be realized from trades without considering the homework involved in making that money. This normally happens especially after winning a few trades in a row.
- The attitude of always looking for easy ways of making money without the tried and tested means of hard work, patience, resilience, etc.
Overcoming Greed
The good thing is that Greed can be overcome. You cannot fight an unknown enemy. Knowledge is therefore the key to dealing with any problem. In the next few paragraphs, you will be equipped with the necessary tools for combating greed.
- Identify Greed as a problem.
The first step to solving any problem is Problem identification and it is key to solving every kind of problem. It is very difficult to help anyone who finds it difficult to realize and accept their problem as one. Problem identification helps to figure out the root cause of a problem to draft and implement an ideal solution. To identify greed as a problem you must know the characteristics of greed.
- Be aware that greed is a mindset and a habit.
It is important to note that Greed is a mindset as well as a habit. It can therefore be overcome by the same principles for dealing with negative mindsets and habits. The American Heritage of the English Language defines a mindset as: “A fixed mental attitude or disposition that predetermines a person’s responses to and interpretations of situations”. It also defines a habit as: “A recurrent, often unconscious pattern of behavior that is acquired through frequent repetition”. The mindset of greed is that which undergirds and fuels the habit of greed. The mindset of greed says that one can only be successful by being greedy. It supports the thinking that to be successful you must take so many positions and trade every day though it is not the case. The habit of greed is developed based on these assertions. It is therefore paramount to deal with this mindset by believing that you neither need to trade every day nor do you need to increase your risk appetite to be successful, etc.
- Develop a trading plan.
Develop a trading plan that must contain the guidelines and rules, patterns, or strategies to determine profitable trades, when to enter and exit trades, proper trade management guidelines, risk management, and money management rules. The practice of a trading plan helps to develop a new mindset for trading by educating your mind that your trading plan is the right thing to do. Once this mindset is developed, your emotions can no longer determine your trading decisions. You are therefore on the path to success.
- Endeavour to follow your plan by practicing self-discipline
To be able to effectively follow your trading plan, you must practice self-discipline. Self-discipline will enable you to trade when you have to and to exit when you need to. You will no longer be fond of holding trades more than it is mete and also avoid over-trading. Trade only when your plan says so and follow your trading plan to the letter. You will also avoid chasing the market when you miss a setup knowing that missing a setup is part of the game and better opportunities will come later. Self-discipline will enable you to handle profit and loss properly. Sometimes, winning trades can birth a losing streak of trades due to unmanaged emotion. Also, losing trades can lead to perpetual loss of trades if self-disciple is ignored. One aspect of self-discipline is learning to take responsibility for your mistakes and this is key to effective problem-solving approach.
- Keep a trading journal
A trading journal is a documentation of all your trades, reasons for taking them, stop loss orders, take profit orders, notable events, outcome of trades, etc. A trading journal is meant for trade evaluation and reflection. This will help you know whether you are making progress in keeping to your trading plan or not. It has other advantages including enabling you to evaluate your trading plan for necessary amendment or adjustment where the need may be.
Conclusion
Greed can destroy your trading career. The ability to master and overcome greed is one of the virtues that separates the few successful 5-10% traders from the masses. You have the chance to devastate greed or allow greed to devastate your trading career. Read carefully and follow the guidelines enumerated above to save your trading business from destruction by Greed.
