Most beginning traders fall into this category. Greed in trading is mostly seen when traders do not know when to exit a winning trade because they feel it will still go in their direction. It is most times as a result of regret of leaving a previous winning trade hat later continued in their direction. Any trader faced with this challenge has to learn to be disciplined when trading. Discipline as a trader entails sticking to a preset strategy. Sticking to your strategy is one trait a trader must possess. In the case of greed in trading, the main solution is to follow your exit plan.
AY, a day trader saw a trade setup which was in line with his strategy on an early Monday morning. He decides to go long on the trade as soon as the New York session begins. he was very sure the trade was going to definitely end up in profits. He logged in the trade and to his greatest surprise, he was in profits almost immediately. Two hours into the trade, the trade started going in the opposite direction. At first, he was tempted to go out of the trade but he learned from his mentor that good traders stick to their strategy. So he left the trade to go on till he was out of the trade four hours later with a loss. AY was sad and disappointed so he decided to call it a day in the trading world. The next day he spotted a high probability setup and followed his strategy word for word however the trade still ended up as a loss.
Question of the day
If you were AY what would be your next line of action?
If you were in a trade and it was going in your favor and it then changes direction after making some profits. What will you do?
Fear is a very crucial emotion when it comes to trading psychology. The effect of fear on a trader can be very disastrous and equity crushing. In my next post, I will be dedicating a full post on Fear and how to defeat fear as a trader.
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