Fear and greed are often identified as the main drivers of financial markets. This is clearly an oversimplification, however fear and greed do play an important role in the. Understanding when to embrace or tame these emotions could prove to be the difference between a successful trade and a short-lived trading career.
Watching a position move against you invokes the fear of realizing that loss and so traders tend to hold on to losing positions for much longer than they should. In fact, this was discovered as theA second scenario where fear tends to get the better of traders is right before entering the market. Despite the analysis pointing towards a strong entry, traders may find themselves bogged down by the fear of loss and end up walking away from a well thought out trade.
Greed has appeared many times in the financial markets. one such time was during the dot-com bubble where individuals bought more and more internet stocks and inflated their value tremendously before it all came crashing down. A more recent example isThere are several ways to take control of your emotions and make sure fear and greed do not influence your trading decisions or overall success.in place to avoid any emotional impulses that deviate from the plan.