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Does anyone have any suggestions on how to overcome the
emotions of fear and greed when really trading? I am having a hard time
entering positions, however, once I enter a position, I am fine - even
if I take a loss. Has anyone else had this problem? If so, how did you
overcome it?
Reply:
I remember seeing an excellent post here a couple of months ago by Wayne
Moody who wrote on Discipline. One of the things he wrote stuck in my
mind and I am reproducing it here. I do believe it partly answers your
question.
One needs to keep the trades small at the outset so that the losses are
small. So will be the profits. However, a series of such small
profitable trades does wonders to our own sense of self confidence. This
is one definite way to overcome the fear of trading. As Dr.Wayne Dyer
put it in one of his books "we have nothing to fear but fear itself"!
As far as Greed goes, I think it is not half as bad as the other
emotions- hope and fear. After all with greed you only end up losing
what you have made (assuming of course that you will protect with at
least a breakeven stop). The best way to beat this would be to use split
trades- one lot for locking in minimal profits and another lot for
letting the profit run. A trailing stop of x points would be the best
exit for the second lot. This may of course be more difficult to do in
day trades and may be more applicable in positional trades.
While on this, can anyone answer this ? On the one hand, we have the
systems saying :start small, build confidence, scale up etc etc.
Assuming we did all this and we become fairly successful when do we
start following one of Gann's rules - quit the market for a while after
a series of successful trades ? The policy I follow has been to quit
when I hit the first loss making series of trades after a long string of
success. Any better ways ?
Thanks for the answers, in advance.
Dr. Narayan
Mumbai, India.
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