How To Manage Greed When Trading Futures

There’s an old Wall Street saying: ‘The market is driven by just two emotions: fear and greed.’

What is greed and how does it affect my trades?

The definition of greed is ‘excessive or rapacious desire, especially for wealth or possessions’. Now, of course everyone wants to get rich quick, but adopting the greed mentality in futures trading makes it hard to maintain gains and keep to a strict investment plan over the long-term.

Now don’t get us wrong, an element of greed when trading is required as incentive, it’s what drives us futures traders to take (hopefully!) well-managed risks. Rising profits might make you feel empowered and keen to take risks to keep gaining, but that’s the time to identify the greed kicking in. Listen to your stops, acknowledge your risk-reward ratio and don’t take that trade if it doesn’t feel right.

Excessive greed when futures trading means stops get pushed back, targets get forgotten and your long-term plan goes out the window – all you see is shiny dollar signs. Here, we take a look at some tried-and-tested methods of managing greed when trading futures.

Managing greed when futures trading:

Managing greed when trading requires a bit of planning:

• Firstly, identify the dominant market emotion for the day – is there a sense of fear or greed on the market?
• Extricate yourself from the emotion as best you can and keep yours under control – don’t just blindly follow the general sentiment
• Plan to win but expect to lose
• Trade small
• Stick to the basics and to your long-term plan
• Try and achieve emotional balance – being too rigid with your strategy can also be detrimental. Balance being a little bit greedy with having respect for the markets
• Plan the trade then trade the plan and remember, in futures trading, it’s not what you make that counts, it’s what you get to keep.