Today I want to discuss the emotions of greed and fear and how they apply to trading. Greed and fear get in the way of your forex trading, especially if you are trading in a short term horizon.
For example, let's say that a chart trader looks at a chart, sees a potentially bullish pattern emerge and pulls the trigger with a 20 pip stop loss and a 50 pip take profit. Now he starts to watch as his trade goes up, which initially it seems fine, but then it slows down. He is sitting on a 15 pip profit. He watches the price seesaw, 18 pips profit, now down to 11, now up to 17. finally it hits 10 pip profit and he can't take it anymore, rationalizing to himself that its better if he take 10 pips profit rather than take a loss he exits… big mistake. The fear of losing his money and the greed to take the 10 pip profit did him in. He lost the potential rise that may have happened after that.
What he should have done, after pulling the trigger, instead of watching his profit, is look at the charts, look at the 5 minute to get an idea of what is going on at a finer level, look at the daily for an overall picture, etc. Instead he let his emotions come into the picture.
The bottom line is that on most trades you will lose. It's a fact, but you have to cut your losses and let your gains run.
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