Greed is the Flip Side of Fear

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Dr. M. Woodruff Johnson

13 Jan, 2012

in Psychology

Merriam-Webster's Dictionary defines greed as simply, "... a selfish and excessive desire for more of something (as money) than is needed." Greed is often referenced as one of the main contributors to trading loss. Greed mangles the mind by distracting the trader from what matters most in the trade, which is quite frankly, to protect your capital by prudent planning and following rules. It also distorts your judgment regarding high probability strategies and effective follow-through. Additionally, it is the other side of the fear coin; that is, greed can arguably be thought of as a fear of not having "enough."

Of course, having enough is a purely subjective notion, but for the reasonable person, someone who wants more, more, more, as in getting every cent in a move, or wanting more than one's share, is considered "greedy." Whether we're talking about the fear of loss or the fear of not having enough, either way it is a very difficult emotional challenge to getting the trading results that you want. Now, the question is what do you do about those bouts with fear/greed that take your trading effectiveness south? The important thing, of course, is to manage your fear/greed one trade and one incident at a time.

Managing errant emotions is one of the most important trading skills that you can develop. Emotions are an inextricable part of being human and cannot be totally taken out of the trading equation. However, you wouldn't "want" to take emotions out of your trading even if you could. Yes, negative emotions throw a monkey wrench into your process; for instance, anxiety, fear, greed, guilt, self-doubt, impatience, apathy, to name a few, are what mangle your thinking. But what is also true is that positive emotions support effective decision making and follow-through. Emotions like inspiration, determination, patience, confidence, curiosity, and the satisfaction of viewing your trade run its course successfully are highly supportive to effective follow-through. So, if you became actually emotionless, you would be divesting yourself of the power of positive emotions. This, of course, begs another question and that is, "How can I maintain more of my positive emotions?"

Monitor Your Thinking
Well, the first thing that you want to do is to monitor your thinking. What and how you think is where emotions begin. Look at it this way. If, during a trade, you tell yourself things like, "I don't trade very well," or, "This type of trade really turns against me," or, "I'll probably make a mistake on this trade," then emotions of anxiety, trepidation, fear, and self-doubt, among others, are what follows. Emotions are connected to thoughts. If you think positive thoughts, then you will respond with an increase in positive emotions. On the other hand, if you think negative, power sucking thoughts, you will begin to feel in ways that are consistent with those negative thoughts. So, you must not only monitor your thoughts, you must change them when you become aware that they are negative. Changing negative thoughts can be challenging and difficult when you first begin the process, but if you remain diligent, you will begin to consistently reverse negative thinking.

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