In the previous article of mastering psychology series, MASTERING
PYSCHOLOGY PART-2 TRADING DIFFERENT FROM OTHER BUSINESS we learned how
trading is different from other business. In this article let’s learn about our
first emotional enemy GREED.
Greed, The desire
to win more than a position will naturally give is one of these problem areas.
Example: if I trade nifty by
shorting 2 lots, and my technical sound trading system gives a target of 20pts
on the downside. When I reach this 20pts on the downside instead of closing the
trade if I still hold the trade because my emotional friend who hates me
winning says “come on its down, so hold it we will get another 5-10pts from this
trade”. Since, it’s my inner voice I skip my technically perfect
trading system and listen to this emotion called greed. Now after sometime I see the trade goes against my face and
end with a loss of 40pts. So, here I had a good technical trading system which
showed my exit but look what greed did to my trade. It took over myself and made
my wining trade a loser.
The second effect of greed has upon many
traders is to cause them to over position, or take a large position in a trade
than should be taken if good money management is being used. When you put more
into that position than you know you can afford, you may find yourself in a
panic to get out of what could otherwise be a profitable trade.
EXAMPLE:
if you have Rs, 100000 logically you can trade only 2 Lots of nifty futures but
if I m greedy I can trade by taking 4 lots of nifty future as MIS order. Say I take
4 lots of nifty future order for long position with 50pts target with a SL of
20pts. If had only 2 lots my total loss would be 3000 only, but since I have
4 lots now my total loss is 6000. Say at 2 pm you find nifty moved 15pts against
you and your SL is about to be hit. Now it creates a panic as the loss is high
when compared to my 2lots loss I quit the trade. But, soon around 2:30 pm I see
my SL not being hit and trade is moving up again and soon at 3:15 pm my target
of 50pts gets hit.
If I had only not taken the over-position which created the
additional panic for me I would have stayed with the trade and achieved my
target.
In the next article we will further see about out emotional
enemy Greed.
Happy trading friends!!
0 comments:
Post a Comment