Trading Psychology: How to overcome greed when trading forex

In the film Wall Street, Gordon Gecko famously stated, “Greed is good.” However, in practical terms greed can cause major issues. From a psychological standpoint, greed is one of the most dangerous things that a trader must deal with. It is quite easy to fantasize about the millions of dollars that you’re about to make trading, and how much money you make on a trade that you happen to be involved in. However, this is one of the most dangerous pitfalls that you will run into during your trading career. Unfortunately, it is very common and a leading factor to wiping out retail accounts.

Quite often, traders will look at a position that is working in their favor and convince themselves that the market is going to make them rich overnight. One recent example was the Bitcoin market, which went parabolic during 2017. While we don’t know how this market turns out, a simple glance at the charts makes it obvious that a lot of traders were feeling their way through the market, and not thinking.

Stepping aside from the market, and looking from the outside, it’s easy to see that buying Bitcoin at the $15,000 level made no sense. However, the market went even higher and reached towards the $20,000 level and reinforce the idea of being greedy as a good thing. That’s the biggest problem with the markets, sometimes you will be rewarded in the short term, only to get punished for being so ridiculous. Looking at the Bitcoin chart, you can see that those who jumped in at the very end of the rally are down 50%. This was easily avoidable, by simply looking at the chart and asking, “how much further can this go, and who’s left to buy?” Make sure that it makes sense to be involved in a market. Being greedy and not thinking your way through position is a great way to lose money.

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