Trading involves keeping a level head
There is a saying by Forex, stock, bond, option and commodity traders that “to win it, you have to be in it.” Until this point, a currency trader might have taken the necessary steps to prepare to trade the Forex market.
Learning the mechanics of Forex, opening a trading account, and analyzing the currency pairs are all essential steps that a new trader must make. However, until this point there has not been any legitimate monetary risk.
Placing the trade is where the person actually enters the world of Forex trading and uses their own capital to generate more capital.
Many people stop here. They don’t ever actually place the trade, even after they have done all the pre-trade work. They may have even funded the account with thousands of Dollars. Many people are simply not ready to take that next big step: placing the trade. Others enter the trade with enthusiasm.
At this point the trader must control the “dangerous duo” of greed and fear. Greed and fear are the two emotions that cause more losses and end more trading careers than any other factor.
The first part of the dangerous duo is greed. Traders can get very greedy and lose their sense of their trading goals and the ability to manage risk in the marketplace.
Novice traders often make “greedy” mistakes. They purchase too many lots, enter trades with a bad risk-reward ratio, stay too long in a trade, or fail to take the appropriate risk management steps. Making money is certainly the main reason to trade, but setting reasonable goals is essential for every trader.
The second part of the dangerous duo is fear. Fear of losing money, embarrassment, failure, success, and a host of other emotions often stops people from entering a trade. In other cases, fear causes them to enter too many trades, which is called hyper-trading.
Fear is a powerful emotion that experienced traders learn how to control. Novice traders tend to succumb to it. However, new traders must learn the steps to control fear as they approach the market and place their trades.
