A trade will always have an outcome, it’s a fact. Regardless of whether the outcome is positive or negative the trader or investor will always have a set of feelings that will come out as soon as the outcome occurs. Feelings are somewhat unavoidable and at the same time are destructive for the trader’s future if not handled and understood correctly. No matter how many risk management manuals or trading strategies you go through it’s the human part of a trader to feel the result, the good and the bad. At the same time a lack of feelings from the trader can be as equally destructive.
It’s not enough for a trader to know all the ins and outs of an effective trading plan but what is also key is that the trader or investor can harness and control their emotions at all times as trades running on emotions have repeatedly resulted in devastating losses.
In the world of online forex trading all traders and investors have at some point come across and were taken over by one of, several or all of the trader’s 5 deadly emotions.
#1. Greed
People in the business are forever witnessing traders and investors falling hard from their high pedestals because of this emotions. The nature of the field makes it understandable and expected that traders and investors are money minded and that’s how they should be if they are going to keep on pushing themselves to reach higher. What is deadly though, is trying to push higher and higher in one day. A success has the habit of making the trader get carried away and seek for more and more, but that is how he or she will eventually stumble into a grand loss. The key to controlling Greed? A daily trading plan. Traders must always set limits for themselves and exercise enough discipline to not break them and stray away from what they had set out for on that specific day.
#2. Fear
Fear represents the polar opposite of Greed because while Greed pushes the trader to unknown and unplanned territories Fear forces the trader to remain still and incapable of taken even the smallest of risks that have been set out and formulated in their trading plan. After a series of loses it takes over making the trader lose complete trust in their abilities which might then lead them to making irrational and uncontrolled decisions. In desperate attempts to win back the capital that was lost Fear will sometimes drag the trader to making on spot trades without any strategy behind them ultimately leaving them completely drenched. Fear can only be conquered once the trader realises that there is never a 100% chance of a win and that loses will happen at some point or another no matter how successful or experienced the trader is and he or she should be confident in their own technique and approach to trading. As well as confidence it’s important to comprehend that the trader himself is in control of the trader, in the end they are the ones clicking the buttons and no decision is made without their approval.
#3. Euphoria
Euphoria represents the adrenaline rush, the boost of confidence and sureness of skills traders get after experiencing a long streak of successes. A bit of Euphoria is healthy, it a stroke of reassurance to the trader that their strategy is working but a trader must be careful not to let this emotion carry them away and slowly leave them on the doorstep of Greed. A trader should congratulate himself or herself but not take it too far thinking that since everything is has been going his or her way so far that gives them permission to take advantage of the wins and turn them very quickly into an even bigger list of losses.
#4. Panic
Panic is the trigger of desperation, the sudden and uncontrollable need to get back what was lost and to regain a safe ground to stand on. Panic results in the trader losing all matters of logic and skill and makes a laughing stock out of their reckless trading. Panic itself is rather logical so there is no need for it to lead to illogical actions. When the trader realises that he or she has been doing something terribly wrong, instead of trying to fix it straight away they should take a step back and regroup themselves, go through their trading strategy and figure out what they have been doing wrong. If that equation does not come up with a sufficient result traders must then remind themselves the delicacy of the market and its mood swings, it might have not been working in their favour on that particular day but things could still change the next.
#5. Stubborness
Stubbornness is what’s lurking behind all the other deadly emotions because is what keeps traders from learning from their mistakes and growing into the successful traders they can be. Although again one of the things that characterises a trades is his arrogance, he or she must never think that they are already the best they can and that they’ve learnt everything that should be known to reach gold. Stubbornness should be turned into humility and a trader can only do that by constantly reminding himself or herself that there will always be room for improvement and even if they are doing well they can still be doing a lot better.
Traders beware of the 5 deadly emotions for they can mean the end of your trading career in a single click.
