It's been a few months since we last wrote something. During this time, I watched the Markets move and do all the things we expected them to do. We watched with anticipation how the Market would answer the question of fiscal scales in the US and others. We watched the news portray different events around the world; both good and bad. I also had the opportunity to witness some beginner forex traders trying to make sense of everything. There is one thing I have seen time and time again. Typically, beginners trade with their heart, not their head.
The key word in this lesson is Emotions. Forex trading will always be full of them, the movements of the Forex market, many times, are based on them. Obviously, some marketers are driven by emotions from their rush to buy or sell and how sometimes their plans overflow. A common question I hear on the market is "Why did I ever do this or did I do it?"
I have often wondered what causes us to go on the market when we are not fully prepared and come up with prices that do not fully agree with our plans. I cannot say that I know every reason why many of us (and all beginners) do this, but I would like to suggest that there are two main reasons. These two reasons are greed and fear.
Greed comes when the market goes as we expected then, quite naturally, we want more! Somehow we get the idea that it will last a very long time. Perhaps the laws of physics have not quite sank it – "what's up …" In some ways, we seem to have forgotten that eventually everything is changing.
One thing to remember is that in order to have a successful trade you need good strategy and discipline to execute that strategy. As good as it may be, trading is completely useless without properly disciplined strategy.
Fear comes when we realize that there is profit and we actually miss it. The other time when Fear plays a role is when we believe that by the way trade can go, we begin to fear losing money. I have learned that until we learn to rule over fear and greed, our results will be very volatile. The worst part is that my biggest concern for new marketers is if money management is not strong, many emotional traders will soon run out of money – long before they even have a chance to establish themselves as legitimate traders.
So my advice to you as a beginner or advanced trader is simple; don't let your emotions manage. There is no room in the forex trading halls for people who cannot dominate their emotions – especially fear and greed.