Fear and Greed | Which Will Cost You More Money?
In the trading market, fear and greed are two common and far-reaching emotions. Many traders often find themselves caught in the whirlpool of these two emotions, leading to unsatisfactory trading results. Users' shared experiences vividly illustrate the specific manifestations of these two emotions in trading and the cognitive biases people have towards them. Below, we will analyze the impact of these two emotions on trading in depth.
When traders are in a greedy state, they often think of “earning more” even when they have already gained unrealized profits. For example, although they have already made considerable profits, they may think, “Let me hold on a bit longer,” hoping that the market will continue to move in a favorable direction to gain more profits. However, market conditions are complex and changeable, and this excessive greedy mentality can easily lead to a reversal of the market, causing the original profits to gradually evaporate, ultimately resulting in losses instead of further gains.
Fear manifests in trading as excessive sensitivity and timidity. When the market shows slight fluctuations, traders may hastily cut losses and exit out of fear of further losses. Yet often, right after cutting losses, the market continues to move in the original direction, leaving traders filled with regret. This fear psychology causes traders to prematurely abandon potential profit opportunities.
Most people tend to admit they were “too greedy” after experiencing trading losses, but rarely acknowledge that they were “too fearful.” When discussing the reasons for losses, people often say, “Sigh, I could have made more,” while few say, “Sigh, I wish I had been bolder.” This cognitive difference may stem from varying perceptions of greed and fear.
In the trading market, fear and greed themselves are not the fundamental causes of trading failures; the key lies in how we respond to them. The market only recognizes results and does not give special treatment based on our mental state. Therefore, we should not get caught up in the question of “which is scarier, fear or greed,” but rather think about how we should act when these emotions arise next time. By acknowledging the existence of these emotions and establishing simple and effective rules, we can better cope with fear and greed, thereby improving the success rate of trading.
