Are You a Greedy Forex Trader?

Updated from its original posting on 2012-03-09

Several traders and their accounts have suffered because of greed. In fact, this is how the saying “Bulls and bears make money; hogs get slaughtered” came about. No other animal embodies greed better than the hog and in the trading business, the markets show no mercy to hogs.

The Merriam-Webster definition of greed is “a selfish and excessive desire for more of something (as money) than is needed.” Sound familiar?

Let’s face it, it’s our desire to acquire handsome returns that drives us to trade, but this desire becomes unhealthy–even dangerous–when it is EXCESSIVE.

That is why greed is often considered the most dangerous emotion for traders; even worse than fear. Fear can paralyze you and keep you from trading, but your capital is preserved for as long as you keep your hands in your pockets. On the other hand, greed PUSHES you to act, in ways and at times when you shouldn’t; that’s why it is dangerous.

In particular, greed can prompt you to act irrationally. For traders, this usually comes in the form of overleveragingovertrading, chasing the markets, or holding on to trades you know you should’ve exited long ago.

When you think about it, greed is not that different from alcohol; it can make you act foolishly when you have too much in your system. When it comes to a point that greed clouds your trading judgment, you are practically drunk with it. Like many other worthy endeavors, overcoming greed requires a lot of effort and discipline. It isn’t easy, but it can be done. It’s all a matter of taming your ego.

You will have to admit and accept that you won’t make the right call every time. There will be instances when you won’t catch the market’s full move, or times when you will miss a nice setup altogether.

But that’s just how trading goes. When you accept that the market is bigger than you, and that you’re bound to make mistakes, then you’ll be more focused on following your trading plans instead of succumbing to greed.

A lot of successful traders have said that they’d rather be lucky than good. For them, it’s better to attribute success to luck than their own skills. It might not be good for the ego, but it’s definitely good for your trading psyche. And that’s probably one of the secrets of trading. Don’t be a hog and you won’t get slaughtered.

  • Rita

    The title of the article drew my attention. After reading it, I had to admit I am a hog. Now that I know it, I will immediately work on it and change it.

    Thank you for making me aware of it.


    • Dr. Pipslow

      Thanks for checking out my blog entry! I think it’s really part of human nature to be greedy for profits at some point, it’s just a matter of managing that emotion properly and managing risk as well. Glad my article could be of help. See ya!

  • I was taught to have a thresholdwhen scalping.

    Depending on volume traded, I normally exit at $20 in the black. Any more is gravy, any less is nit profitable.

    But sticking with the $20 gives me a ‘bird in the hand is worth two in the Bush’ mentality

    • Dr. Pipslow

      That’s a good way of putting it! Sometimes it can be tempting to hold on much longer with the promise of larger profits, but this greedy mentality can prevent one from cashing in or at least locking in some profits when the odds seem to be turning against the trade. Thanks for sharing this!

  • Phil Jones

    Good article.

    The difference between ‘bringing home the bacon’ and ‘being the bacon’.

    • Dr. Pipslow

      LOL good one! Definitely don’t want to be the bacon and get chomped up!

  • Alexander Ogomigo

    It is a timely reminder of what is inherent in every human being but adequate self-control will check this monster; when you are often winning most trades, overconfidence will creep in stealthily and the next thing is to fall like a humpty dumpty who had a great fall and all the kings horses/men could not put humpty dumpty together again. thanks for sharing this nice piece!

    • Dr. Pipslow

      Thanks for checking out my blog and for the kind feedback! Maintaining self-control is definitely easier said than done so it does help to have reminders every now and then. Awesome Humpty Dumpty analogy haha

  • santhanam

    wondelfull,simple,lovely to read,its an attitude that
    one can and should change to acquire it. Thanks

    • Dr. Pipslow

      Thanks for the kind feedback. Good luck and good trading!

  • Uwem Etuk

    well.., what more can i say about greed..when your in the market making successive winning streaks, then all of a sudden it all becomes so easy,so that strategy of yours that has kept you on a winning streak becomes loose zaps , .. sometimes i wonder has there ever been any body who has had 12 in a row wining streaks..hollar

    • Phil Jones

      12 in a row?

      Possible of course but winning like that on a practice account and Id be closing it down and looking for a different supplier.

      Live? I would pay to spend a few days just looking over your shoulder.

  • Pippin Hot

    Great reminder! I have been a hog lately and it cost me big pips. I really need to stick to my trading plan. I was 400 pips positive earlier and lost everything because I wanted more. I had to write myself a letter to tame the ego. I attached an excerpt of this article too. 🙂

    • Dr. Pipslow

      Yeah it really happens. Got my share of winning streaks followed by a massive loss because of overconfidence as well. You’re right, every bit of reminder helps. Interesting how you wrote yourself a letter! As for me, I put a bunch of sticky notes on my wall for reminders like these haha

  • QQuang

    When I see trading history of a man who has a streak of winning trades, my greed is growing and I want to trade like him, to make all the money that he made, and i KNOW it’s the negative emotion. Thank you Dr. Pipslow for your article, very useful and remind me what the risk management is and what is the key when you want to survive in this world!

    • Dr. Pipslow

      Thanks for sharing your thoughts. Good luck and good trading!

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