Greed and fear are two of the most dangerous emotions in trading. Greed fuels management; when traders feel they’re close to a win or miss what appears to be an opportunity, they can often make irrational decisions in order to secure the win. On the other hand, fear can cause traders to become overly defensive, leading them to exit trades prematurely or refuse to take necessary risks.
To combat these two emotions, it’s important for traders to take a step back and assess their reasoning behind entering a trade before they do so. It’s also a good idea to create an overall plan that includes entry points, stop-losses, and profit targets before entering into any trades. This way, you’re creating specific parameters that will help prevent fear and greed from hijacking your trading decisions.