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Paper Trading Greed

 

When many traders fail, it is often a result of greed, which is an underlying culprit. When you begin trading for the first time, it is absolutely critical that you have realistic expectations. While there are times when you could be in the proper position to benefit from a major move, it will take some time for this move to be seen.



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One thing that you must always remember is that any trade, no matter how good it looks, can turn against you at any given time. If this happens and you are trading far too big, then you may find yourself losing a huge amount of money. When it comes to forex trading, one thing to keep in mind is that you can lose a lot even on a small number of trades.



Whether you are a novice who is trading for the first time, or you are a veteran who has been trading for years, it is impossible for you to win 100% of the time. The simple cold truth is that some of your trades will simply not win. The key is to make sure that these losing trades are not so big that most of your equity is wiped out as a result of a loss.



Unfortunately, greed often drives traders to take risks which puts too much of their money at risk, and when the tide suddenly turns against them, they lose just about everything they have wagered. Greed is a bad habit that many traders suffer from, and if you want to become successful, it is a habit that you will want to avoid.



There are a number of things you can do to avoid allowing greed to play a factor in your investment decisions. Most of these things involve altering the management of your equity, along with changing your manner of thinking. The first thing you have to remember is that forex trading is a business.



Because it is a business, there are certain things that it needs in order to function in an efficient manner. The very first thing that is needed is liquidity. No business can continue to operate without money, whether it is earnings or savings. Once the money is wiped out, the business has to close its doors.



The second thing that you will want to remember is that it is always critical to have a game plan. No success basketball team would dare go up against a competitor for a championship without planning ahead. To do so would lead to disastrous results.



By making your trading method based off of simple mathematics, you will often be light years ahead of those traders who choose to invest based on their "gut feelings." By using mathematics instead of following your gut feeling, you avoid the mistake of investing based on emotion, a critical factor in the failure of many traders.



Always Invest Based on Logic, not Greed

As a forex trader, you will succeed once you have established a risk-to-reward ratio that is realistic. For each dollar you make, you must accept the fact that you will lose some dollars as well. For example, out of 200 trades, some will bring you profits, and some will bring you losses.



It is impossible to be correct 100% of the time, as this would imply that you are perfect, and no human is. Therefore, you must expect and embrace failure and loss. At the same time, your goal should be to make sure you get more dollars than you lose, because if you do not, you are essentially throwing away money. Just like any business, your goal should be to earn more money than you lose.



The greatest investors are always those that make decisions based on logic as opposed to emotion. Warren Buffet, one of the best investors in the world, is known as referring to himself as a computer. This statement is more than just a man who is bragging about his skill: within this statement lies the key to becoming a successful investor.



Instead of investing like a human, who often makes decisions based on emotion, one must learn to invest more like a computer, which makes decisions based on cold logic. Yes, while it is true that forex traders may use technical analysis software to assist them in their decisions, it does not construe that thee trader is investing like a computer.



To invest like a computer, one must be free of greed. Greed is a human emotion, it is not something which is found in a machine. By erasing your greed, and making decisions based on hard logic, you will be much more successful than other forex traders.



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The reason why Warren Buffet is one of the top investors on the planet is simply because he avoids greed and emotion in his investment decisions. Just as Buffet makes his decisions based on logic, so must you do the same if you want to succeed in the forex trading business.





Read Next: How to Win the Forex Battle



 

 

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