Forex traders often feel two emotions, fear and greed.
However, these two emotions are exactly what will get you into trouble.
Emotions Make You Fiddle
If you have a strategy that has a positive expectation, what you need to do is execute that strategy consistently and flawlessly. Fear and greed make you deviate from the strategy because these emotions compel you to alter your strategy to either minimize loss or maximize gain.
Changing your strategy based upon an emotional twitch is exactly what will lower its expectation and make you unprofitable
Following Your Emotions Makes You Part of the Crowd
Bulls go long, bears go short and sheep just get slaughtered. The majority of traders out there are the ones trading emotionally, and they will run their losses and cut their profits. The crowd gets slaughtered because it does not have a good solid technical or fundamental reason for taking a trade. Every trader has experienced times when the market is "out to get them", when every trade seems to go against them from the moment they enter.
It's a sign that they are probably trading emotionally and letting fear or greed dictate their actions.
How To Manage Your Emotions – The Bad News
The results of your trades can make your emotions run high or low, it's a volatile and hostile market out there, and fear and greed can very easily creep in and be your undoing.
The bad news is that the human brain is hardwired to feel certain emotions in certain situations, fear when there is a perceived chance of loss and greed when there is a perceived chance at a gain, however small. It is exactly this hardwiring that makes people run their losses through fear of losing, or take their profit too soon because they get greedy.
You can not stop yourself from feeling fear or greed when you are trading
However this does not mean that you can not manage your emotions
How To Manage Your Emotions – The Good News
Having a clear strategy is the best way to help you manage your emotions. Your strategy must be clear on when to enter, where to place your stops and profit targets and have a positive expectation.
If it is all of the above you just need to stick to it and keep executing it flawlessly and without question. Follow the strategy and it will, over time make you money.
This way it does not matter if you are feeling afraid or greedy, your strategy or system will eliminate the emotion from your trading and you should make money over time.
Source by Mark S Tan