Greed is a complex emotion because it is often connected to many other strong internal feelings and beliefs. The market itself has a reputation for stirring up different emotions. However, that does not instantly help you tell if you are exercising good sense.
A Guide to Day Trading
If you are under the influence of the strong impulses created by the feeling of greed, you may be doing things that you would not otherwise do. If your judgment is being clouded by strong emotions, your trading strategy may suffer, and you can’t always afford to ignore this situation.
How can you tell if your ability to reason has been impaired by greed? It is difficult, but here are some useful techniques you can use:
1. Keep track of your trades. If you can afford to remember how much money you need every week, you can also afford to keep track of your winning and losing percentages.
2. Carefully observe the impulse to throw caution to the win and trade like mad until you hit your performance goal.
3. Practice healthy skepticism when you start to perceive every stock as a winning asset.
4. Manage your stress. When your mind is calm and balanced, your decisions can happen in response to accurate perception of events. When your mind is clouded by greed and anxiety, you can quickly lose the ability to make good judgments.
5. Pull some money out from the market. Always trying to make more money is a sure sign that greed has you in its grip.
6. Avoid trading more than your normal average. When you find yourself doubling the amount of trades you perform during the day, your judgment is probably under the influence of greed.
7. Keep your profit margins in perspective. Most earnings are based on small movements, so attempting to win big could be a sign that you have fallen under the influence of greed.
8. Monitor your percentage margins for each trade. If you notice them increasing during a string of losses, your judgment may be cloudy.
9. Stick to your opening position for price targets. Changing this on a whim can steer you off course.
10. Don’t forget your own rules.
For certain kinds of activities, there is no substitute for experience. Day Trading can become a kind of art when you are able to monitor your internal influences while also exercising good market judgment. The practicality of these observations may help you to recognize the true value of this practice. Think of it as a fringe benefit. Day Trading can be refined to generate positive outcomes. This method helps you to develop a human skill with many other possible applications in life.