As the old Wall Street saying goes:
“financial markets are driven by two powerful emotions –
greed and fear.”
Greed and Fear are the two most powerful emotions in the market which impacts a traders’ psychology to a huge extent. Greed is a human emotion which is a result of selfish and excessive desire for more of anything that is needed. Having excessive greed can lead to disastrous consequences , the same can happen with fear. Fear is an unpleasant, often strong emotion, of anticipation or awareness of danger in most of the situations.
As per a trader’s understanding,
“Having Excessive GREED simply means to make lot of money
and at the same time,
too much FEAR to lose it all.”
Aspects of these two powerful emotions of a trader can be explained in detail as follows:
Excessive Greed: As a trader, we are never satisfied with the profits we make. Most of the people, who get into trading, have a mindset that they can double up their investment in just a month’s time which in itself is nothing but greed and in order to fulfil that greed, they start gambling in the markets. So overall this mentality of getting rich quick (greed) eventually leads to gambling and as discussed in earlier blogs, ga mbling can never provide consistent returns in the long run.
Excessive Fear: Just Like Excessive greed, too much fear is not good for trading. If you fear entering the markets thinking,what if I lose all my hard earned money, then this is not the right place for you. Trading is all about taking calculated risks and making returns from that. If you fear to take some amount of risk, then you can never earn high returns because as trading is based on probabilities , you can never be 100% sure.
Moderate Greed: The term “greed” has an overwhelmingly negative connotation and I don’t deny it on a personal front . But as a trader, I have come to realize that having some amount of greed can always keep you motivated to work improvising your strategy and achieving your profit targets. Now, this moderation of greed is what I call Healthy Self Interest. Having said that, being emotional beings, we should always keep our motives in check..
Moderate Fear: Fearing the markets too much is most definitely not good but having no fear at all, will also land you in trouble . Like I always have experienced, we generally fear our parents but that’s just out of respect not anything else.. Likewise, it’s good to fear the markets in moderation , so that you always stick to strategy and remain disciplined. One should always fear the consequences of not abiding by the rules.
To sum up, yes you can make big money from trading but it’s a marathon not a sprint. You need to have realistic expectations and not be too greedy or fearful. Risk Averse people should control their fear and Risk Taker should control their greed.