Greed is an in-built emotion in all humans. It makes us want more of something than we need or require, and when trading, it can lead to overconfidence and disastrous consequences.
One of the main problems with greed is that it makes us irrational, which is the last thing you want if you are trying to profit from forex trading. You should be looking at the bigger picture, not letting your emotions get attached to every trade you place.
Greed is seen as a prime factor of many financial setbacks. It’s something you need to avoid if you want to be profitable in forex trading. Here are some tips on how to do this:
Don’t set unrealistic goals
Make sure that your goals and targets match what can be achieved with your knowledge and experience. Don’t expect to see results within a few months if you’re starting. It takes years for people to master forex trading and become consistently profitable.
Recognize impulsive behaviour
Greed often leads to such behaviour as placing unnecessary trades or changing your strategy dramatically. Recognizing impulsive behaviour is vital because it helps you control yourself and your emotions.
Control your risks
Greed often leads to taking on unnecessary risks, which should be avoided in forex trading. Before starting any trade, you need to calculate the potential loss and only enter the market when you’re sure your position will not exceed this amount of money. If it does, immediately close the trade. There’s no use in losing a lot of money for a small profit.
Use a demo account until you are confident enough
An excellent way to practice and learn the basics before going all-in with real money is using a demo account – an online account that gives you virtual funds to play around with. This way, even if you make mistakes due to greed, you won’t be risking your capital.
Think long-term
Short-term losses result from greed, usually to reap instant benefits. When you’re trading forex, try to focus more on what can happen in a few days or weeks from now rather than what’s going to happen tomorrow. Over time, this increases your chances of being profitable significantly.
Have an exit strategy
An excellent way to lessen the effect of greed is making sure that you have an exit strategy for each trade before entering it so that you automatically close it when certain conditions are met. For example, if you enter a trade based on technical analysis and plan to keep it open until its price meets your target, make sure that you also have a stop-loss level in mind, and this is the price at which it will automatically be closed.
Avoid getting into debt
Trading forex involves dealing with significant amounts of money, which means that if you lose it all, it could result in unpleasant consequences. If your bankroll keeps shrinking due to greed-driven trades, this might lead to debts arising from borrowing cash or even borrowing funds from family or friends. When trading forex, try not to get into such situations by avoiding credit purchases and only withdrawing the precise amount of money you plan on using for each trade.
Avoid taking huge risks
While trading forex and trying to make money fast might seem like a good idea, in most cases, it will end up with you losing all of your funds at once instead. Greed often leads to taking considerable risks hoping that even though each trade might end badly, one of them will be immensely profitable and make up for all previous losses.
Bottom Line
If you are confident in your trading abilities and know what steps to take to avoid overconfidence, greed will never stand a chance of ruining your trading career. Before investing their money, new traders should use a reputable online broker like Saxo Bank and trade on a demo account. For more information, visit this website.
