- Reviewed by James Stanley, Nov. 24, 2021
Greed is a natural human emotion that affects individuals to varying degrees. Unfortunately, when viewed in the context of trading, greed has proven to be a hindrance more often than it has assisted traders.
Greed can very easily turn good trades into bad ones and bad trades into worse trades. This article provides a number of tips to control greed and how to stop it interfering with your trading success.
What is greed in trading and how does it impact trader success?
Greed can be described as an intense desire for something and often manifests as the intense desire for wealth. This can easily get out of hand when the market moves against traders but is equally likely to negatively influence trading decisions on winning trades.
Examples of greed when trading:
- ‘Doubling down’ on losing trades
- Adding capital to winning positions
- Over-leveraging
Greed can alter your mental state, harnessing your focus to maximise utility/happiness/wealth. The desire for these things often results in traders placing trades they otherwise would never have thought of executing.
Furthermore, greed poses a threat to the trading account. Doubling down, adding too much capital[1] to winning positions, and over-leveraging can quickly result in a margin call[2] or can deplete account equity.
Top example of how greed impacts trading
The chart below provides an example of the negative influence of greed. The chart shows a scenario where a trader enters a long position in EUR/USD[3] (without a stop[4]) after the large green candle[5], hoping that that market moves higher. The market moves lower and places the trader into a losing position. Greed may entice the trader to not only maintain the existing
