Fear and greed are the emotions that affect a trader’s performance, it affects both the novice trader and a professional trader. Emotion has a psychological impact before and after a trade decision. It plays a very important part in the traders journey from beginner to a professional trader. The most important asset as well as his liability a trader has is his mind.

Trading in financial instruments involves patience and discipline. As humans, we are rather emotional and are vulnerable to make mistakes. A trader should plan a trade and stick to his plan and should avoid any distractions. Trading psychology is of great importance to ensure that all trading decisions are made with discipline, and confidence and should have consistency.

Controlling our emotions during trading is tough. Rising prices are an illustration of greed in the markets and when prices are falling we see a sense of fear taking over.

Fear and greed are very strong emotional feelings in trading that impact all traders, it affects both novice traders and seasoned professionals.

Fear of losing money in trading will always play on one’s mind, a trader needs to find the right balance and not be too much thinking about losing money and should not be in a negative state of mind. Fear at times is good as fear of wiping your capital will cause you to place a stop loss on all your trades, hence it works to a trader’s advantage. Fear can work against you also at times,when prices are declining and comes to buying level you abandon the trade setup from the fear that it will go down further and may result in losses.A time few loss-making trades make you fearful and abandon a good trade setup. The main reason for a trader to be fearful is because they have lost big money by taking bigger size trade, they have taken a loss in their account more than they could handle. To overcome fear in trading, always follow your rules have risk management in place, and apply position sizing. Trade with a size and position with which you are comfortable. 

There is an old saying on Wall Street that “ pigs get slaughtered”.This refers to the habit of traders who are greedy and hold on to their winning trading positions for too long and want to sell at the extreme top which prices make. At some point, the trend reverses and they are now caught on the wrong foot. It is tough to overcome the emotion of greed, the human mind is such that you want the maximum in terms of returns. As a trader, you should learn to recognize them and develop a trading plan based on logical thinking. Greed often manifests as looking at your open positions and seeing the MTM profits as to how much you have made and how much more you can earn by keeping the trades open. Unless you have closed a position, as a trader all you have is MTM profits and not booked profits.

How to overcome the emotion of fear and greed.

• Have a trading plan
• Define rules for scanning trading opportunities
• Fix your style of trading 
• Decide the trade size based on position sizing rules
• Have a target for exiting a winning trade
• Have a loss limit on a weekly and monthly basis
• Have a routine that makes you comfortable in trading
• Stay focused and avoid distractions
• Focus on your study and avoid what others are saying
• Act as per your plan and stick to your plan