This is a classic topic of trading educational articles. And it’s like that for actual solid reasons. Nenad Kerkez, head of technical analysis and trading at Elite CurrenSea, has a really interesting article on how to avoid getting caught by the Emotional Spiral Resistance.
The mistakes he mentions, getting mislead by greed and fear, also took the best of Scott Barkley, president of ProAct Traders, who recalls suffering heavy losses trading Silver (XAGUSD):
“I had been trading Silver up for about a year. I was making more pips than I thought possible and succumbed to a rookie mistake even though I had been trading for 15 years. I let the two emotions that beat most traders take a hold of me: fear and greed.
My left brain did not engage and control my right brain and I entered at the top, sure that Silver was going to break the $50.00 mark. The market immediately flipped on my trade and I thought that was a minor correction. I pulled my stop and lived through the correction, then decided to cost average this with a second position. The second trade forged ahead and I was sure that, at the least, I would get to break even on the first trade and profit on the second. I set a large stop and when I came back to my computer found that the market had turned 700 pips. Of course I lost on both trades with a huge loss to my former robust account.
My hard lesson was: Never let greed or fear run your trading. The left side of your brain is the analytical side and it has to control the right side (where flight or fight reside)”.
After losing big, a popular feeling is to try to get back what you’ve just lost. Revenge trading is also a source of losing positions. Anil Panchal, analyst at Admiral Markets, was one of the victims of the EUR/CHF bloodbath induced by the SNB in January 2015, but despite trying, he got nothing back:
“It was way back in 2015 when SNB removed floor of its EUR peg vis-a-vis CHF. I held some EURCHF long and it was going quite well. Then, a sudden slump of 100's of pips that took me few minutes to analyze the reason. Even after knowing the reason, I tried to recover my loss by buying few small lots, expecting that the pair would bounce back. However, nothing happened and I lost a major chunk of amount from my balance.
Hence, the point was even after knowing the rationale behind the move, I tried to recover the loss and that cost me badly high. Never go against the market because trend is your best friend and revenge is your biggest enemy”.
Dr. Woody Johnson, psychology instructor at the Online Trading Academy, also shares a memory of how his emotions took the best of his trading, letting a NASDAQ short run into the weekend despite being against his own rules:
“The mistake had to do with holding a day-trade position over the end of the week. I was playing the cash index, Nasdaq, with an option. I bought one month of time with 10 contracts deep in the money. It was on a Friday. Toward the end of the day I knew it was important to get out of the trade but I became seduced by the bad news and assumed that the downward push would continue. Plus, the spread was big and even closing the trade while paying several hundred I still would have had a tidy profit of about $1800. But, I allowed the market to close with my position still in tow.
On Monday the Nasdaq gapped up and at the opening bell I was already $4K in the hole. It continued like that for a few days whereupon I finally liquidated the position with a substantial loss of over $25K.
The lesson was to follow all of my rules to a T. Also, another lesson had to do with greed: how it can distort judgement and distract your thoughts leaving you vulnerable to being seduced by forces in the trade that at that moment look good. If we took a few more minutes to confirm that what we are looking at is legitimate, we could identify those clunkers that masquerade as good decisions”.
Being seduced by “convenient” news releases or getting greedy and looking to make too much money on just a trade are regular outcomes that usually don’t end well. And you can only blame yourself for not following your initial trading rules.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Editors’ Picks
EUR/USD risks a deeper drop below 1.1750
EUR/USD keeps its vacillating mood in place as the the NA session drwas to a close on Tuesday, hovering below the 1.1800 hurdle amid acceptable gains in the US Dollar. In the meantime, market participants and the FX galaxy are expected to closely follow President Trump’s SOTU speech around 2AM GMT.
GBP/USD regains 1.3500 and above
GBP/USD extends its advance for the third day in a row on Tuesday, this time retesting the area beyond the 1.3500 hurdle. Cable’s uptick comes despite decent gains in the Greenback and the dovish message from the BoE’s Bailey at the UK Parliament.
USD/JPY climbs to 156.00 area as markets doubt BoJ rate hikes
USD/JPY catches a fresh bid wave and challenges the 156.00 region on Tuesday. The pair rallies as the Japanese Yen (JPY) falls hard on reports that Japan's PM Takaichi voiced concerns to BoJ Governor Ueda on interest rate hikes.
Editors’ Picks
AUD/USD remains capped by 0.7100, focus on inflation data
AUD/USD shrugs off Monday’s pullback and regains composure on Tuesday, coming close to the 0.7070 region despite the Greenback trading with modest gains ahead of the opening bell in Asia. In the meantime, the Aussie Dollar should remain under scrutiny in light of the publication of critical inflation data in Oz early on Wednesday.
EUR/USD risks a deeper drop below 1.1750
EUR/USD keeps its vacillating mood in place as the the NA session drwas to a close on Tuesday, hovering below the 1.1800 hurdle amid acceptable gains in the US Dollar. In the meantime, market participants and the FX galaxy are expected to closely follow President Trump’s SOTU speech around 2AM GMT.
Gold appears offered around $5,150
Gold is giving back a good portion of the recent multi-day rally, receding to the $5,150 zone per troy ounce amid the decent bounce in the US Dollar and mixed US Treasuty yields. In the meantime, markets’ attention remain on upcoming comments from Fed speakers.
Australia CPI to highlight persistent price pressures, backing a hawkish outlook
Australia will release its key set of inflation figures for the month of January on Wednesday, with the Consumer Price Index expected to rise by 3.7%, slightly lower than the 3.8% in the last month of 2025.
The Citrini report: How a debatable AI narrative can shake Wall Street Premium
That AI-related headline alone was enough to rattle investors.US stocks slid sharply on Monday after a widely circulated Citrini Research memo outlined a hypothetical “2028 Global Intelligence Crisis”, warning that rapid AI adoption could push US unemployment into double digits as early as by mid-2028.
RECOMMENDED LESSONS
Making money in forex is easy if you know how the bankers trade!
I’m often mystified in my educational forex articles why so many traders struggle to make consistent money out of forex trading. The answer has more to do with what they don’t know than what they do know. After working in investment banks for 20 years many of which were as a Chief trader its second knowledge how to extract cash out of the market.
5 Forex News Events You Need To Know
In the fast moving world of currency markets where huge moves can seemingly come from nowhere, it is extremely important for new traders to learn about the various economic indicators and forex news events and releases that shape the markets. Indeed, quickly getting a handle on which data to look out for, what it means, and how to trade it can see new traders quickly become far more profitable and sets up the road to long term success.
Top 10 Chart Patterns Every Trader Should Know
Chart patterns are one of the most effective trading tools for a trader. They are pure price-action, and form on the basis of underlying buying and selling pressure. Chart patterns have a proven track-record, and traders use them to identify continuation or reversal signals, to open positions and identify price targets.
7 Ways to Avoid Forex Scams
The forex industry is recently seeing more and more scams. Here are 7 ways to avoid losing your money in such scams: Forex scams are becoming frequent. Michael Greenberg reports on luxurious expenses, including a submarine bought from the money taken from forex traders. Here’s another report of a forex fraud. So, how can we avoid falling in such forex scams?
What Are the 10 Fatal Mistakes Traders Make
Trading is exciting. Trading is hard. Trading is extremely hard. Some say that it takes more than 10,000 hours to master. Others believe that trading is the way to quick riches. They might be both wrong. What is important to know that no matter how experienced you are, mistakes will be part of the trading process.
The challenge: Timing the market and trader psychology
Successful trading often comes down to timing – entering and exiting trades at the right moments. Yet timing the market is notoriously difficult, largely because human psychology can derail even the best plans. Two powerful emotions in particular – fear and greed – tend to drive trading decisions off course.