2. Greed in Trading Psychology

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2. Greed in Trading Psychology

Greed is even more dangerous than fear. Greed is the selfish emotion that drives you to want more profits always when trading forex.

Let’s put it straight: every forex trader yearns to get substantial returns from their efforts. However, this yearning becomes unproductive, even harmful, when it’s too powerful.

Nothing is wrong with the desire of realizing financial success in forex trading. But, if these greedy desires suffocate your common sense and drive your trading decisions, then there’s everything wrong with them.

There’s a common saying among financial traders that “when bulls and bears make profits, pigs are slaughtered”. The pig is a very greedy animal, and the analogy is useful in the trading business, since it shows that the market does not respect pigs—greedy pigs lose their money.

As such, the psychological emotion of greed is even more harmful than fear. Fear can prevent you from making trade decisions or make you exit too early. Conversely, greed compels you to push the buy or the sell button in a manner that’s far too risky. That’s why greed can be much more destructive than simple fear.

Since greed pushes us to act irrationally, it’s a very dangerous emotion. Just like drinking alcohol, greed can prompt you to behave foolishly when it has intoxicated your system. If greed cripples your trading choices, then you’re drunk with it, and you’ll soon wipe out the trading account.

For example, traders intoxicated with greed usually fail to exit their winning positions because they think the market will forever obey them. Greedy traders also add to open positions whenever the market has moved according to their expectations. Other dangerous behaviors of greedy traders include overleveraging, quickly jumping into trades, and overtrading.

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