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Eliminating a Greed Mentality...

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Eliminating a Greed Mentality...

Post by fxvampiro on Wed Feb 27, 2008 7:22 am

What is it about money that makes us get so excited?

Is it the things we can purchase?

Is it the illusion of security?

Is it the power we might have over others?

Is it the promise of being more marketable to the opposite sex?

To the investor or trader, money is none of these things.

To the investor-trader, money is a way of keeping score. It lets
them know how well their system and the implementation of the
system is doing. Nothing more.

The benefits that money brings are a side benefit only after the
trading system has produced results. Not before.

Successful investors understand that emotions are the greatest
threat to successful trading. That's why a mechanical system of
trading is established.

If the data shows certain patterns, then there is a high
probability-not a guarantee- that the trade will be successful.

Each trade is taken one at a time, and traders understand that
creating wealth is a two step forward, one step back proposition.

A successful trading system imposes restrictions on trading
through pre-determined profit and loss targets. For example,
a trading system may stipulate that every trade must have a
stop-loss set at 8% and a profit target of 15%. If the stock or
other type of investment hits its stop-loss, so be it.

If a stock hits its profit target, the stop-loss is moved up and
the stock is allowed to "run" until stopped out by sliding (up)
stops.

Cut the losses (no matter what you feel) and let profits run.

Many traders and investors find such a mechanical way of trading
stifling and doesn't allow a trader's "true talents" to shine.

They chafe at the bit and want to show what makes them special.

This egotism is the real cause that prompts greedy traders to
abandon or not even have a system. It's not so much a matter
of material greed but ego need. Why do I say this?

Investment funds should be "disposable" in that investors don't
need the money for their day-to-day needs. Investment funds are
used to protect capital from the ravages of inflation and to build
wealth.

The greed factor usually pertains to the latter-building wealth.

But investors need to understand that both processes are long
term propositions and the most powerful influence is the affects
of time and compounding profits. Steady double digit gains will
blossom and expand many times-over time.

Greed is a short term emotion that can quickly destroy the
compounding effect by destroying the capital base on which
long term wealth can be built.

To control the natural greed factor, investors and traders need to
have a long term horizon and realize that the real game is won
through patience and discipline. Home runs are nice but an
aberration.

To win the game, one needs to hit for average and not be sucked
into the temporary excitement of going down town. Following a
well defined trading plan will help keep emotion (greed and loss)
out of your trading and allow probability to carry you along the
slow, steady course to success.

If you are looking for overnight wealth, go to Las Vegas.
They would love to see you.

fxvampiro

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Re: Eliminating a Greed Mentality...

Post by Follett on Tue Mar 11, 2008 11:55 pm

I think I am a greedy person. I do not know how much I actually need, I always want more.I am trying not to bee greedy as it is not good for forex trading)))) any ideas on hot stop being greedy would be appreciated.)))))

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know thyself by selfevaluation

Post by JPMorgan on Fri May 23, 2008 11:16 am

well,follettu can start by evaluating urself first.Really understanding yourself and how you think that can give you an edge that others in the market don't have.

What are seven key psychological areas that you need to work on or are currently working on?

Don’t say “none” because that answer really suggests that you are totally unaware of what is going on with you.

We basically live in a society in which we are programmed to feel separate and alone from everyone else, programmed to follow the rules of the games that others invent for us to play. The net result is most people do the exact opposite of what is necessary for success. As you become aware of this, you’ll also become aware of all your patterns, beliefs, and emotions that you need to work on or clear out to become more successful as a trader.

Here are some examples that might fit some of you:

I really have a fear problem that enters into my trading. I want to make trades but I’m afraid to pull the trigger. And that fear seems to come up in other areas too; I guess I’m really afraid of failure.


I have some internal conflict when it comes to working on myself. On one hand I want to, but on the other hand, I’d rather do other things. Working on myself feels like having a tooth pulled. For some reason, I just don’t want to do it.


I don’t have any discipline. Sometimes I just decide to trade. I make almost random trades or take recommendations that I’ve been given, but just certain select ones appeal to me. And the net result is that those trades never seem to work out. (Note: this is also an incomplete answer. What is the selection process? What happens to those trades? Do you cut losses and let profits run? Are you compelled by some emotion to trade?)


My mother continually criticizes me. My mother gave me everything when I was growing up, and I’m very grateful to her. But she’s always telling me what I do wrong. In fact, it upsets me to be around her. Yet at the same time, I feel that I must support her. I need to find out why her criticism bothers me so much and what I can do about it.


I really don’t like to be alone. When I do all of things that are important to trading success, like psychological work, I have to go inside and search and that really disturbs me. Also when I try to meditate, things come up that cause me to be afraid. (And, of course, if you had this response, I’d want you to at least find out what’s trying to come up that is causing this).

Those five statements are just examples of what might come up for you. But whatever you find…look thoroughly. What’s really going on? What are the emotions you don’t want to feel? What are the hidden beliefs? What is the internal conflict where part of you wants certain things and another part wants something else?

What are your key beliefs about the markets?

It is important for you to remember that you can only trade your beliefs about the market. So what are the key beliefs that are guiding you?

To really understand what’s guiding your trading, you should list at least fifty beliefs. However, at least ten is a good starting point
to help you get started, I’ve listed twelve of my most important beliefs about the market, which are my personal ones.

Cut your losses short and let your profits run!!!!!!!


Risk, as it relates to how much you can lose in a trade, is much more important than risk as it related to how much volatility you can have. Both are related though.

You must know the objectives you wish to accomplish. What would you like to accomplish and what can you tolerate in terms of drawdowns? In my case, I’d like to make 10% per month in my trading.


To achieve your objectives, you must understand and use position sizing to your advantage.


Fill your portfolio with a core position that you might adjust weekly or monthly. However, then find efficient stocks/currencies and use leverage with those stocks/currencies

When I have a large down day, thoroughly investigate what happened and how I might have caused it or made any mistakes.


Keep a trading diary on every trade.


Follow the ten tasks of trading.


When I cannot be actively trading, remove all speculative positions.


Understand the risk reward of each trade before you enter it. For example, your potential reward should be at least three times your potential risk.


Keep stop loss levels with my core positions and actively monitor the market for my speculative positions. (Again, this one is my personal preference.)

I want to caution you again that these 11 beliefs are my personal beliefs. Your beliefs might be different. However, certain beliefs are universal for good trading. These are just ideas to get you going.

So be honest with yourself, and start to look at what you truly believe about the markets. You may surprise yourself.

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Re: Eliminating a Greed Mentality...

Post by JPMorgan on Sat May 24, 2008 2:12 pm

The Flow of the Markets
here's some stuff i got from a guy called van thrp which is very interesting n thot i cud share here,its about market flow
Imagine yourself flowing down a river, only you don't know that you are. You do, however, notice that when you move in one direction, with the flow of the river, you move rapidly. When you move in another direction, against the river, you move slowly or not at all. In fact, when you go in that direction, you seem to put out a lot more effort just to stay in place. Your life becomes a struggle. It just seems to push you in another direction. Feeling miserable, you fight against it. But it doesn't help. You still seem to move only in one direction—with the flow of the river.

Most people prefer to struggle against the river. They try everything they can think of to go upstream. All solutions like this—going against the flow—have the same result: frustration. If you were in the river, what could you do to make your life easier?
One solution would be to get out of the river. But that would be giving up. There is only one easy solution—to acknowledge or accept that the problem has nothing to do with the river. The river just is. And it moves downstream and nothing you do can change that. When you realize that the problem stems from you, then the solution becomes obvious - just relax and flow with the river.

Buy High, Sell Low?
One of the oldest adages in market psychology is "Don't be afraid to buy high and sell low." Let's analyze what that means. If the market price is high, then the market is moving up. Those who are afraid to buy because the market is too high are fighting the flow of the river. It is possible the river may change direction, but you cannot predict if it will by determining how long it has been flowing in a particular direction. It may continue in the same direction for an unspecified length of time.
Then again, if the market price is down, it also indicates the direction of the flow of the river. Those who are afraid to sell, once again, are fighting the flow.

Whether you go with the flow of the market or struggle against it, the market will continue to flow, taking you with it one way or another.

Why do traders resist the flow of the markets? They do so because they play psychological games with the market. The most common game involves not being willing to give up what you perceive to be control, the need to be right, although you have no control over the market flow.

When you are struggling with the market, the struggle becomes all consuming. You don't realize that you are struggling with the market. Instead, you find yourself always looking for some solution to overcome the struggle. The struggle obscures the obvious solution: Letting go.

For example, suppose you have a tendency to be in a perpetual market bear, always expecting the market to go down. For you, every little turn in the market is evidence that the market is turning. As a result, you always go short and consequently, take a beating. You repeat the process, over and over, until the market actually turns down. With each transaction the struggle against the flow of the market intensifies for you.

Even worse is the trader who refuses to accept the inevitability of eventual loss. The market moves against each position the trader takes, but he refuses to go with the flow and refuses to accept the loss, no matter how small. It is an affront to the trader's ego. As a result, he refuses to accept it and the loss becomes larger. The bigger loss is even harder to take and the trader again refuses to accept it. The struggle continues until the loss becomes so overwhelmingly large that the trader has no choice but to take the loss.

The solution to the problem of resisting market flow is to realize that the problem has nothing to do with the market. The problem stems from you, the trader. The market is not going against you personally. The market is simply moving. Whether you go with the flow of the market or struggle against it, the market will continue to flow, taking you with it one way or another. Market flow is bigger than any individual trader. The question is whether you realize how you are creating your struggle against the market. When you push against the market, the market seems to push back. But the market is not the problem.

The trader's struggle with the market is the problem.

JPMorgan

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Re: Eliminating a Greed Mentality...

Post by Jacq Stone on Wed Sep 07, 2011 11:19 am

One better solution to eliminate greed is to have a strict discipline and patience in trading. Always set a clear goal before you do the trading. Never let your emotions take over you for it can ruin your trading style which will cause in losing your hard earned money.

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