How to deal with greed in your trading career?

Money can have a powerful effect on the human psyche. While most of us are motivated by money to do things, if we become too attached to it or even obsessed about it, the risk is that the lust for more will overcome rational decision making. 

This is especially true in trading, where you deal with probabilities and endless variables that affect your bankroll. When this happens, there’s often no coming back from it because once you make mistakes, they tend to compound themselves until you’ve lost all your hard-earned profits. So how does one avoid this trap?

Trading is a money management game

The key to dealing with greed in trading is something that most people won’t tell you. It’s all about money management. Unlike most other types of investments where returns are either binary or constant, trading has no rules. Every trade is different by virtue of its circumstances, so you can’t rely on any hard and fast rules. Instead, what you can do is use money management to ensure that your bankroll grows at a steady rate without the need for big wins or significant losses.

In addition, by sticking to the three percent rule, you are also limiting your exposure to risk as a percentage of equity which means that you can afford to trade in less liquid markets where the spreads are wider. 

It’s essential not to overtrade either because if you have so many positions open at once, then something will go wrong and probably will. If your trading methodology requires you to have a certain number of positions open at any one time, though, then consider using a smaller amount of capital so none of those trades can cause too much damage if things turn sour.

Make use of charting tools

Stay on top of all the latest developments in charting tools. With the internet making it easier than ever before to find information about trading, this is often too tempting. The problem is that you’re trying to save your account by looking at promising new developments, but in doing so, you’re risking throwing away every penny you’ve made if anything goes wrong with those trades. Don’t even look at that stuff unless it will directly improve your trading results. 

The reason why many traders fail isn’t just because they have a bad strategy or poor money management but also because they are unable to manage their greed and, ultimately, their bankroll. If you’re a smaller trader just starting, use what you know works.

Don’t get greedy but don’t be too scared either

As with most things, the key to learning how to deal with greed is all about balance. You need to make sure that your bankroll keeps growing steadily over time and at a rate that you’re comfortable with (and realistic enough about).

However, while more isn’t always better, and risk management can be critical when trading if you want to make real money from trading, don’t cut down your risk too much or else it will come back to haunt you. 

Final Word

Trading provides the perfect opportunity for someone who wants to make a lot of money very quickly. The internet makes it even easier because there are no geographical restrictions on where you can buy or sell stocks online, and all you need is an email address and some cash (or margin). 

When greed gets involved simultaneously, things begin heating up. They may result in a “potential” trader getting into the markets for the wrong reasons and taking unnecessary risks that may do more harm than good. Contact a reputable online broker from Saxo Bank for professional advice and guidance, and start trading on a demo account before investing your own money. For more information, navigate to this website.