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Greed in trading Forex
Greed and fear are very significant reasons to trade forex, and they affect all Forex traders, even for the most hardened.
Will explain how to see the manifestation of greed in forex trading, and how you can take advantage of this very greed of other bidders.
The increase in the size of the position
After successfully trading for some time You start to feel too confident. You are seized by greed, and You begin to increase the size of trading positions, to "make" more money. Risk? Still such a risk? You neglect to increase the risk, as You "Shine" to increase profits.
This is the fastest way to reset Your Deposit too many traders tend to increase the size of open positions is disproportionate to the size of their deposits trying to profit big, than it is possible to obtain given the size of the account.
Forgetting about the rules of money management to liquidate your account after spending only a few bad transactions.
Too long retention of the position
You carefully planned your trade and open a position. And the market does exactly what You'd expect, and moves in the direction You expected, Everything is fine! However, You place the order for the closing of the transaction upon achieving a profitable level ("TakeProfit"), or a pair of and reached him. She was close, but still not reached it.
So You've decided to move on and not agree "on the bird in the hand"? Greed tells You to do, and fear whispers to You about the closing of the transaction. A compromise solution is to shift the level of stop losses (stop loss) to breakeven or even a small yield. Too many traders tend not to do anything like that, allowing us to be open positions in the hope that the price will reach TakeProfit level or continue to move in the "right" direction.
This can in the end end with the market turn bad and costly deal.
Use in their interests the greed of other traders
As mentioned, many of the "winning" deals never materialized, and they continue to "hang out" in the open. When the number of such open trades in a certain direction reaches a critical level, these agreements will ultimately be closed. And when that happens, the market will move in the opposite direction.
Information about open positions is available in the weekly Commitment of Traders report (COT) published on the website of the U.S. Commodity Futures Trading Commission (CFTC). It is published on a Friday and contains the data for the Tuesday of the same week. So all the data relevant for traders who use higher time frames.
For example, the recent positioning against the Euro reached the level of saturation (summer 2012). Too many traders expect that the Euro will continue to fall, and it will be lasting. When shorts on the Euro peaked, the Euro pichavaram trend, turning a profit against the dollar and against other currencies such as the Australian dollar.
Traders who are aware of the scope of such escalation of excessive greed probably made a profit as a result of return movement.
|Category: Forex | Added by: (29.10.2017)