Is Greed a Good Emotion?
This is a very good question where there are many arguments both for and against this. In my own opinion it depends on the system. For example if you have a system where you swing for the fences quite often looking for those 3:1 or greater risk to reward trades then it is almost imperative that you do get a little greedy when you are right. You see if you structure your trades this way (especially trading FX) you likely are going to lose the majority of them regardless of how well you planned your trade. This is simply a fact of life. You can't move the market and those that can will likely head for your stop unless there is no way to do that. It happens from time to time but those trades occur only once every 50 days or so when heavy buying or selling is happening in the markets.
If you are trading short term and looking for a few ticks then greed is very costly. For example you have a short term system where you use tight stops (this in itself is a deadly combination because you can't take volatility into account) then greed is not something that you want to employ. You have to have your target and your stop clearly defined. When you hit your stop you are out. When you hit your target you are out. Period. You should not continue to trade. When I traded today I quickly hit my 10-15 ticks in oil. I got another 7 ticks from the S&P. As a result of my targets being hit and my daily tick levels achieved I quickly close down my station and wait for tomorrow. It is that simple.
You say, "ya but you may have got more"?
This is true but the converse is true also. I may have given it all back and then some.
In using a short term system you MUST have rules you follow. You must have discipline and patience. If you don't you have no chance.
Here are some rules you can trade by:
1) Never and I mean NEVER trade against the 30 minute trend.
2) Define the opening range of most markets when they open. For example when the oil market opens at 0900 eastern time take 30 minutes to see who has control of the market. This is your range. Where the market makers make the market. It is usually in the direction of the established trend once the whip saw is settled. Whoever wins take the trade in the direction of the market movement. A break out of the lower range suggests bears are in control. A break out of the upper range suggests the bulls have it.
3) Set a tick limit for the day. Stick to it.
4) Have a plan before you start to trade. Know why the market should move to an area. If you don't know why don't trade. You need a reason. Not your gut.
5) Never move your stop loss. NEVER.
6) Never average down unless you have built it into your risk model. You should not lose more than 2% of your account per trade.
7) Never try to get back at the market. There will come a time when your system stops working. Do not abandon it.
8) There are many markets. Pick one that is trending well and stay away from the choppy ranging markets. More money is lost this way than even trading against the trend.
9) Remember that a volume or market maker area can be quite big (50-100 ticks) so don't try to time the trade with 4-5 tick stops. It won't work.
10) Never use leverage as a tool to make profits. You will eventually give it all back.
Know you times you want to trade and stick to that. If you follow these rules and wrap them around your trading you should do alright. Cheers!
If you are trading short term and looking for a few ticks then greed is very costly. For example you have a short term system where you use tight stops (this in itself is a deadly combination because you can't take volatility into account) then greed is not something that you want to employ. You have to have your target and your stop clearly defined. When you hit your stop you are out. When you hit your target you are out. Period. You should not continue to trade. When I traded today I quickly hit my 10-15 ticks in oil. I got another 7 ticks from the S&P. As a result of my targets being hit and my daily tick levels achieved I quickly close down my station and wait for tomorrow. It is that simple.
You say, "ya but you may have got more"?
This is true but the converse is true also. I may have given it all back and then some.
In using a short term system you MUST have rules you follow. You must have discipline and patience. If you don't you have no chance.
Here are some rules you can trade by:
1) Never and I mean NEVER trade against the 30 minute trend.
2) Define the opening range of most markets when they open. For example when the oil market opens at 0900 eastern time take 30 minutes to see who has control of the market. This is your range. Where the market makers make the market. It is usually in the direction of the established trend once the whip saw is settled. Whoever wins take the trade in the direction of the market movement. A break out of the lower range suggests bears are in control. A break out of the upper range suggests the bulls have it.
3) Set a tick limit for the day. Stick to it.
4) Have a plan before you start to trade. Know why the market should move to an area. If you don't know why don't trade. You need a reason. Not your gut.
5) Never move your stop loss. NEVER.
6) Never average down unless you have built it into your risk model. You should not lose more than 2% of your account per trade.
7) Never try to get back at the market. There will come a time when your system stops working. Do not abandon it.
8) There are many markets. Pick one that is trending well and stay away from the choppy ranging markets. More money is lost this way than even trading against the trend.
9) Remember that a volume or market maker area can be quite big (50-100 ticks) so don't try to time the trade with 4-5 tick stops. It won't work.
10) Never use leverage as a tool to make profits. You will eventually give it all back.
Know you times you want to trade and stick to that. If you follow these rules and wrap them around your trading you should do alright. Cheers!
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