Greed,
Fear, Hope, and Regret.
These are four psychological states of emotions that drive most individual
decision making in any market( and life)in the world.
According to me, most traders in market focus too much on the market technicals
or fundamentals(on others opinions and views in life) and not enough on their
own pshycology, own views,own interests( people build interests on how
other thinks about him/her not on how he/she think).
1.Greed:
is commonly defined as an excessive desire for money and wealth.
In trading terminology, it can specifically be defined as the desire for a
trade to provide an immediate and unrealistic amount of profit. When greed sets
in, all a trader can focus on is how much money they have made and how much
more they could make by staying in the trade.
2.Fear
: is probably the most powerful of all human emotions.
When traders become afraid, they
will sell a position regardless of the price. Fear leads to panic, and panic
leads to poor decision making. Fear is a survival response. People have been
known to jump off of buildings during market panics
3.Hope: is a feeling of expectation
and desire for a certain thing to happen.It’s an individual’s desire to
want or wish for a desired event to happen.
Hope may be the most dangerous of all human emotions when it comes to trading.
Hope is what keeps a trader in a losing trade after it has hit the stop. Greed
and hope are what often prevent a trader from taking profits on a winning trade
4.Regret: is defined as a feeling of sadness or
disappointment over something that has happened or been done, especially when
it involves a loss or a missed opportunity. If
you miss a winning trade, then you must move on to the next potential trading
opportunity.
Finally we humans cannot dwell without
emotions .we cannot eliminate these emotions( in both trading and life), but we
can control them by knowledge, experience, by setting right mindset, using our
discretion based on situations, risk and money management etc… we should not let our emotions
control us,we need to control our emotions .
