While conducting mentorship, I get many questions multiple times. Many times, I like to share some interesting conversations with our students and our TCI family. It often contains many important lessons that is important for all those who is willing to become a consistent trader.
Recently I got a question from one of our students,
“I am unable to stop trading and walk away after I have achieved my daily goal. Many times, I achieve my goal of making 10,000/- using our methods in early morning trades, but then I think there is more potential and so I again start and end up losing all the profits I had made that day.”
This is a common problem I also faced in the earlier days of my trading.
In simple terms, it is termed as “GREED”.
But the root cause of this is fear. Greed is just one of the forms of fear. In simple words, fear of not making enough profits leads us to get back to the market and pushes us to keep trading so we don’t miss any potential opportunity of making profits.
The only way you can check on yourself whether you are trading out of greed or not is by maintaining a trading plan every day. To make a proper trading plan you need to write out your plan first and execute those in your trades to make money profitably. Pro traders control their greediness by maintaining a well executive trading plan which helps them to find out what they are doing in the market, even if they make any mistake, they rectify the mistake and set a new trading plan to improve their trading skills by not making the same mistake in their trade. If you show consistency in your trading plan soon you will get rid of your greediness.
Overtrading is also the result of greed, only trade as per your plan and if you are getting excitement from overtrading then you are not trading but simply gambling your hard earn money.
How I deal with it??
I also have the urge to make more money every time I make good money for a day. I solve this problem with a risk management system.
I have made a profit of 50k in the early morning and according to me it a decent one. My aim for that remaining day is to make an extra profit but not at the cost of losing my current 50k profit.
If I find any good opportunity, I will only risk 25% of my profit I made on that day.
i.e., I will only risk 25% of 50k = 12.5k.
So even if I lose, I will only lose 12.5k and end up making 37.5k on that day.
Let’s say that trade goes in my favor and gives me 1:3, I will make another 37.5k and I will close that day with a gain of 87.5k profit.
In any way, I will not lose my entire profits.
Successful traders contemplate where they will exit if wrong and how much they are going to lose. This simple, yet often overlooked step will help you take small losses because once you have a plan, all you have to do is trade your plan. To keep this detrimental emotion in check, having a definite trading plan in mind ideally written out will help. Keep the plan nearby where you can reference it prior to placing any trade.