All is lost to fear and greed

I've been working closely with a pro-trader and doing some experimenting on scalping over the last 3 weeks. I'm finding that the biggest problem wasn't the spread, the broker, news releases or even the trade - It was fear.

I had discovered in a trade where I was 7 positions deep in the wrong direction that I was actually more comfortable LOSING than I was WINNING!

That sounds crazy, but I'm sure you've been there too. Don't think so? How many times did you close that trade out at 3 pips profit only to watch it go 300 pips your way 3 hours later? How many trades did that news release bump your stop and then fulfill the ( used to be ) target? How many times did that trade have 100 pips profit and it stopped out @ 250 pip loss?

If any of those questions brought a horrid feeling upon you - then you're addicted to loosing too.

There is hope

This thread is designed to give insight to those that have overcome the fear of winning the trade ( closing at the first sign of profit ) and the greed of wanting too much from it ( waiting for it to go just a few pips more ).

Fear: So I was trading with percentages which resulted in tight stops a decent limits. This was working some and mostly not working. I needed more volume to be able to do a small enough lot size to get the trade within my risk requirements and execute trades but make more than $3.75 on a .01 trade. This is a good strategy for pip capture and a painfully slow strategy for equity growth.

It wasn't until I decided to try some scalping that I discovered my inverted comfort. I began the scalping with .01 lots and no stops - just using an indicator process that I had recently discovered to be insanely consistent.

This worked really well if the market was in perpetual consolidation. I found that in Trending markets the process was really, really bad. I would close the orders out in losses, or cut some of my positions short because the trade was overall profitable, or put a really tight SL in the profit as soon as it crossed over when I was down - these things.

Granted being down only about $20 is way way better than $2000 but for me losing is losing the volume doesn't matter.

Later I would find every position, regardless of direction was profitable and the only reason I lost that position was me. Not the Market, not Stop Loss hunting, not the news release, the analysis, nothing lost those trades aside from me. I closed it out before it was time.

Then one day I decided to do a little scalping on the 5M - 13 hours later I closed the trade out and was just happy to be out. I learned a little here and a little there but what I didn't realize was I was exposing my addiction to losing and my fear control on trade exits. EVEN though I had just recently looked over and saw that all my positions were profitable if I just let them be!!

So, I took what I learned about the trendiness of the market - and applied it back to the 1M chart - this was when the Draghi event happened. The market began to surge, I got in on a sell at the top - 7 times. I really learned as the price was coming down that fear was my problem. As soon as the trades were profitable I wanted to close them all with the satisfaction of a win. ( losing 3 winning 4 )

I don't recommend that every trader take on a 400 pip move in the wrong direction 6 times - but I would recommend getting in the position to just stop and really pay attention to the market. When we stop freaking out about what the trade might do - we open the ability for us to enjoy what it IS doing.

The long and short is really as my wife ( not a trader by any stretch of any imagination - actually hates the fact that I'm doing it unless I'm up ) says: " It's simple, when it goes up, sell, when it goes down, buy".

Truly what goes up must come down. Even on 10 year drops the market will surge up. It's not a matter of catching every pip - but rather riding every wave. Jump in, fight the wave to find where it's going - then stop fighting. No surfer will ever have success telling the wave where to go and what to do. If the surfer doesn't like the wave it passes by.

The same is true for these markets. We're not Market Movers - we can't click a button and make an impact - we can only ride the waves that are made for us.

There's a difference between protecting equity and closing a trade from fear. If the wave hasn't reached the shore - keep riding - the same for trading. Draw-down isn't the problem - fear of losing is - and often this fear will convert our draw-down into loss of capital. If you know the market, and how it behaves then your trading should be quite predictable. And ultimately there's no bad position.

I told my father-in-law that if everyone is playing by a certain set of rules and they're all complaining about being losers, then it seems good to me to avoid their rules. Each trader has to find his comfort - but a trade in the wrong direction is only bad until the direction switches. Don't close bad positions out - wait for the trade to go your way get back in the same direction and ride it to the end, you'll win the trade and have a better confidence overall.

If the trade REQUIRES a stop - it's not a good trade. You shouldn't be trading to target your stops. You should be trading the waves and capturing positive pips.

You cannot trade currency as if it was buy or sell, up or down. It is really one countries monetary worth against another's. It is not the typical "what is this business worth" from stocks. Therefore, riding a loss is not really a loss, it is a gain in the other country's currency. You have to go both directions because it is the nature of currency. Having a "buy" mentality is incorrect because the "buy" is both directions. We say it is a "sell", but really it is a buy for the other currency. For this reason, it is necessary to trade both directions and do not do the typical "buy and hold" that Wall Street wants you to do. It is not applicable. I hope this makes sense.

Fear and greed both are dangerous for a trader if he not controls them in time .In fear we make low losses again and again by closing positions on loss. Greed acts reverse from it , trader take high risk not care about loss they do trading for yes or no , They can win or loose all their money.

I agree. Fear and greed can force your hand have you act irrationally when you're trading with a live account even though you did very well on a demo account. I had that issue for a while but I think I'm getting over it.

dkrock, you're right! I think Stock guys struggle the most with this market because we're not actually acquiring or losing anything - but rather exposing a chunk of currency biased from one side to the other-side with the obligation of it coming back to where it originated and it will have a greater or lesser value after it's trip has completed.

GREED::

The biggest problem for most traders is going to be a "reason" for the trade.

if we trade every opportunity we think we have. we'll always lose.

By setting a very conservative goal - one can filter most of the bad trades from their portfolio.

This week by accepting my wins early, I avoided a 280 pip draw down. Even though I'm tracking the trade for information and research - My account isn't being delt any damage by it.

Each trade should have a purpose for it's execution. The best way to give purpose is to define a very conservative goal. A weekly goal is a good start.

This week I need to accomplish ___________ and the way I accomplish it is by doing _________ and I will only fail __________ much trying.

simply mad lib that sentence and follow it regardless of the "setup" or news or gut feeling or friendly persuasion or the weather and you will find a balance chart that continually grows.

It is no matters u r wrong but it is definitely not good to stay wrong....

There are many studies about human psychology behind winning and losing - funny thing is the chemistry of the brain is practically the same in both cases. So when one is winning it is the same feeling as when losing. That sounds crazy stupid but chemistry doesn't lie and I agree with it almost entirely.

When I see my position deep in red (with a huge stop loss size) I'm very uncomfortable to say the least and heart pounds faster and eyes are fixed on price action every minute of the day; when I see my position deep in green, heart is also pounding crazy, eyes fixed on price action, I'm also uncomfortable in the same way as I am with bad positions: when I'm loosing I want it to go in my favor and expect it to miraculously turn to my favor - when I'm winning I want more, and I'm torturing myself if I should take my godly profit or ride it just a bit more, and then just a bit more more...

I like your sentence about "the purpose" - and would like to extend it somewhat (if I understood the topic correctly, that is ) - The problem is in stop losses: traders think stop loss serves only as a "safehouse" when things go wrong. That is just a speck of true meaning of a stop loss. Stop loss fundamentally defines your trade. It defines the profit target. It needs to be less sized than the potential profit for a trader to succeed (P/L ratio).

Lastly, it is embedded in human psyche to buy low and sell high and we are constantly trying to simulate that scenario in our limited brains - and that scenario works far less frequently than continuation scenarios.
I'm always trying to explain new traders that a market asset which has spent 90% of a shown chart time in an uptrend will most likely continue that uptrend, and vice versa.

I personally trade exclusively based on candle patterns and don't give a rat's azz about news, indicators (well I have 200 sma and sometimes 50), and any other rubbish which would make me extend my thoughts to a hopeless state of mind where I believe I'm successfully multitasking between 5-6 different variables which I believe influence the market(s). It's simple and pure egoism, for which there isn't any room in this line of "work".
The more data you have the more fear/greed you experience.

Concentrate on that what matters - and things which you constantly see in forums are not that

Fear is the same as greed in our brains - it produces the same result: loss of hair.

I would say to be careful about performance goals. Personally, I do not equate them to money. I found that by doing that I forced trades that weren't there, just to achieve a self-induced goal of X pips or X dollars. The market only gives what it gives during the hours you are monitoring it. The bigger moves do not occur at the same time everyday, lol. That would be too easy. So, if you only trade from X o'clock to Y o'clock everyday, then you must prepare for slow days as well as good days.

I trade by technical analysis. I exit for fundamentals. My system is built on math, so I have no idea what a news release will say or how the market will react. When you analysis a business, you look for strengths and weaknesses. I know that fundamentals are my biggest weakness, so I do not even bother with them.

Since my technique is math oriented, then my performance measure is simply a matter of whether or not I executed a trade according to my math. I have my list of trading rules as my background on the computer. Rule #7, "Tracking wins vs losses validates the math. Tracking math validates profit. Did I trade according to my math rules?" I spent years developing my technique and testing its effectiveness. One criteria of its uniqueness was always a matter of trust to limit emotional responses. As long as I am using it as my guide, I can stay rational. Once I stop being rational, I normally lose.

If you system is still losing, and it is the system, not you, then you will inadvertently panic each time you place a trade. If that is the case, you need to stop and go back to the drawing board and figure out an acceptable level of consistency.

As for losing, hmm. I do not lose very often, maybe 2 times a week by a few pips. I break even a bit more frequently, but still lose spread. However, I conditioned myself to accept that by relating it to Texas Hold'em poker. I have to ante to get cards, and then determine if I want to bet or fold with each additional card. I never win every hand. I just take a chance based on the odds and how well my cards match to the flop. In fact, it is my third rule. "Compare each new trade as similar to getting two new hole cards in poker. Must enter (bet) the trade to see flop. Must manage the trade with each new signal (card)."

My point refers to performance standards. I measure whether or not I applied my technique. I use the ante in poker as my cause for action and internal management as the trade develops. So, to apply them together...Did I get a signal and did I enter/exit when I received it? That is my performance standard.

My other rules refer to mental discipline, the actual strategy, and one other that I can share. Rule #4, "Do not fear losses. They actually save you money. Exit (fold) before you lose more money. A losing hand cannot win". In case you are wondering, a loss saves me money in two ways. One, it is often accompanied by a signal and by exiting the loss and entering the alternate direction I recover more than I lost. Two, by exiting a loss timely, I stop losing.

Anyone can enter a trade, but the profitable traders figure out how to exit with consistent profit. Spend 99% of your time looking for a consistent exit that leaves you with profit when your o'clock expires Good Luck