Forex industry involves much more emotions than you can think of. One of the most dangerous for your profit is greed. How to spot greed in Forex?
24 November, AtoZForex – If you are trading Forex, you most probably have noticed that sometimes your trades depend on your emotional stance. Certainly, the thought process behind the trading decisions deserves a thorough examination.
How to spot greed in Forex?
In times of uncertainty and high volatility, Forex traders tend to take emotionally-based decisions. In this particular article, we will cover one of the strongest emotions that affects Forex trading - simple greed. Experts say – understanding how to spot greed in Forex is probably one of the hardest parts about it. Not only we make irrational decisions, being affected by our emotions, we also are getting farther from our set objectives.
In Forex trading, rising prices can be perceived as an illustration of greed. On the contrary, when prices are dropping, we feel fear. We believe it is vital to acknowledge your greed while trading. Below we present to you how you can spot greed during the trade. Moreover, you can use others’ greed for your benefit…
Irrational increase of positions
First of all, after successfully trading for some time, traders start feeling secure and positive about their trades. However, there is a moment, when they start to feel greedy. Most of the Forex traders at this point want to enlarge their positions in order to get more money.
Yet, they ignore the larger risk that comes with larger positions. Such ardor can lead to zeros in your account. A big number of traders usually enlarge their positions in an irrational manner, thus exposing their accounts to huge risks.
Let the winner run?
In addition, there is a big chance that greedy Forex traders are holding on to their positions for too long. For example, they have thoroughly planned their trades and have placed a position. Then, coincidentally, the market behaves exactly how it was predicted. Yet, the Take Profit order was not placed or the pair just did not hit it yet.
Here the greed comes into picture and traders still want “let their winner run”. They are not accepting the partial profit, and let their positions float, hoping for the price to reach their Take Profit. Ultimately, such approach can lead to a losing trade.
How to benefit from others’ greed?
As it is described in the previous example, many winning positions are not emerging, as they keep floating. While these open positions are assembled in a particular direction, they will need to be closed eventually. Following on this, when they are closed, the market shifts to a different direction.
The weekly Commitment of Traders (COT) report published by the CFTC is making the information about positioning available to the public. The report is published on Friday, including the data from Tuesday of the same week.
You can use this method as the mean for prediction of market behavior.
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