GREED AND FEAR CONTROL THE MARKET CHAPTER 3

By | September 24, 2019

GREED AND FEAR CONTROL THE MARKET CHAPTER 3

GREED AND FEAR CONTROL THE MARKET – Poverty and mediocrity want much, but greed wants everything. Greed has only one object and that is to wrongfully take, consume, and ultimately destroy everything it touches and is near. It has no feeling of pity for the devastating consequences or destruction it causes the people, even loved ones, you know. It is ruthlessly ready to destroy everything that is beautiful in your life without notice. It does not care who or what you are, and it is not capricious. It doesn’t hesitate to crush the life out of any human being who gets in its way. It takes what it wants from anyone and anything regardless of any consequences. It moves as if it were above the law. Greed has no time limit to its ultimate destruction. When its hungry appetite surfaces and awakens inside you, it lies to your soul and promises you the world. Greed makes you believe that money, and money alone is life’s answer to all questions. It is more addictive than a drug. And like a drug, it causes you to constantly look for a new high—something more to acquire at whatever cost. It instills the belief that there is always something more to acquire at whatever cost. Do not fail to recognize it in your life. If you are currently in greed’s way, run . . . get as far away from it as you possibly can, at any cost, or you will become its next victim!

Out of all the sayings, I have taught my children, two really stand out as related to this chapter. I hope you adopt them in your life as I have in mind:

  1. When greed exceeds your need, it will usually take you down a path of self-destruction.
  2. Control your excesses.

How you deal with greed in your life will affect your habits at the trading table. I will never forget one year when opportunity knocked at the door of a friend of mine. He found an investment that sounded too good to be true with an incredible return of 400 percent a year. After pestering me over and over again to get involved, I warned him that such returns just don’t last and without being able to do some clear due diligence on the company, I would rather pass and wish him well.

Eventually, however, after watching him receive huge dividend checks over the next two years, I just had to succumb, get involved, and invest. I planned to invest $20,000, which my friend chided me for.

“Come on,” he said, “You are worth so much more! Put in at least a million. Within a year it will be worth $4 million.” I said, “You might be correct, but you might be incorrect. If they stay in business and pay me, my million will turn into $4 million; if they go out of business, my million will be gone forever. I refuse to risk more than $20,000. It is an amount that will not change my life if this opportunity goes bad or I lose all of it. It will not create a financial or emotional burden or threat to my family, lifestyle, emotional happiness, or physical well-being. You got it?”

So I invested the $20,000. Within 60 days, I received a check for $9,000. My friend urged me to reinvest the $9,000 to yield even higher returns within the next 60 days. I told him I would rather wait another 60 days, receive another check for $9,000 to $11,000, and get all my money back before moving forward with no risk of loss or downside on my investment. I told him, “At least I know what I got; I don’t know what I will get.”

As time went on, my friend believed this glittering object of an opportunity was nothing but pure gold and kept sending back the majority of the money he was making, short of buying a larger home with a larger mortgage and a fancy car with a bigger car payment. He even quit his job; he and his wife lived on the income he was making from his investment. As the real estate was booming, his house increased in value, so he went out and refinanced it to take out as much equity as possible. He had put his entire hope in this one opportunity, taking all of his savings and cash and continuing to invest all he had in this one investment.

Well as the saying goes, when it sounds too good to be true, it usually is too good to be true. Sure enough, as I was waiting for my other check for $9,000 to $11,000, the state attorney’s office came in and declared the activities of the company to be a Ponzi scheme and shut it down. The loss I incurred was only the balance of my $11,000, a loss I could live with. But as for my friend, he lost everything. While the state attorney’s office was conducting their investigation, my friend could not eat, sleep, or even think—he was so consumed by the devastation and the collapse of his dream. He came over every day claiming that his life was over.

Failing to look at the potential downside of his investment completely altered his life. After everything was settled by the government, it was announced no one would get any more returns and that the company was bankrupt. My friend was emotionally, physically, and financially devastated. He told me on several occasions he just wanted to commit suicide because he had no money, no savings, no job, and no income. All he had were debts beyond his capability to pay. As time passed, stress took its toll and he ended up having a heart attack at the age of 46 after he lost his house, his car, his life savings, and sadly to say, even his marriage and family.

Greed, Money, and Happiness – GREED AND FEAR CONTROL THE MARKET

GREED AND FEAR CONTROL THE MARKET – Was it worth it? Is it ever worth it? Of course not, but when we let the seed of greed be planted in our minds and hearts, and allow it to grow wild, it changes our lives forever. The outcome is always life-altering for the worse. It whispers deception and lies, promising wealth, health, and happiness. It entices with all its charm and tempts us to keep going because enough is never enough. Well disguised, it is there like a virus multiplying in our hearts and minds, a capricious monster that is never satisfied. Greed has only one objective, and that is to seek and destroy. It ultimately consumes and destroys everything it touches and everything in its surrounding path. The unpredictability of greed means it has no printed expiration date to warn us against poisoning or fatal effects. And if greed poisons us or kills us in the end, it has no remorse and no sorrow for the calamity it brings into our lives. It claims no responsibility for the destruction it causes. It crouches in wait, ruthlessly ready to destroy what is beautiful, without notice. It does not show partiality and will crush the life out of any human being who begins to buy into the lie that money and money alone is the answer to life’s happiness.

We tend to forget that happiness doesn’t come as a result of buying or acquiring something we don’t have, but rather from learning to appreciate what we already have. While my friend was losing everything, my emotional and financial life maintained its stability because I have learned never to risk more than I can afford to lose, always keeping in mind that not everything I might want in life is everything I need.

The key is to never risk anything that will alter your existing lifestyle. It just isn’t worth it in the end. Happiness, peace of mind, and life’s fulfillment is managing your wants versus your needs in your life: Mother Nature provides enough to satisfy every man’s need, but not every man’s greed.

Our society is motivated by greed. Advertising, marketing, and commercials on TV don’t make it easier for us. As a matter of fact, they instill in us those dangerous seeds of greed, telling us we will not be happy unless we buy, use, or consume what they advertise. They try to sell us incredible cars, clothes, electronics, homes, and exotic vacations that all cost money and are well beyond the average person’s income!

Now a major trend is taking place in which buying, selling, and making money online through using your computer at home, or anywhere in the world, is possible. Craigslist, eBay, Backpage, and even online trading companies are participating in that new trend. Right now it is heavily being advertised that the new, untraditional wave of investing and creating phenomenal wealth is via the Internet from the comfort of your own home. Sounds great, but the question remains: how are you going to learn what you are doing?

Ninety-fi ve percent of the world looks at trading as a fantasy get-rich-quick scheme, and they enter the market simply based on greed. If you want to become a Forex trader, it needs to be one of your well-thought-out and well-planned dreams, not just some type of moneymaking ploy. If the stresses from all the complications from debts in your life are driving you to get involved in trading— thinking that making fast money from the market might be the answer to resolving your financial stresses—you better think again. Learning to trade is a disciplined profession.

After beginning a trading career and facing a couple of weeks of limited progress by breaking even or incurring outright losses, many new traders are quick to rethink their involvement in the market. Any loss of money becomes painful as you look back and scary as you look forward.

When Greed Creates Fear – GREED AND FEAR CONTROL THE MARKET

GREED AND FEAR CONTROL THE MARKET – When a trader starts taking losses or enters into an area of vulnerability, fear sets in and trading is no longer fun and games. Because of greed, many people are brought to the trading table with the thought of fast money and the potential for easy living, after all . . . he who is greedy is always in want.

The greatest barrier to most successes is the fear of failure. What is your greatest fear in your life right now? What is your greatest fear in trading? When I was learning, my greatest fear was of running out of money before I learned a successful trading methodology so I could consistently make money.

A human’s deepest fear is not of being inadequate, but of knowing in its heart that it is capable of becoming successful and powerful beyond measure once it conquers its fear of responsibility. It is that light of potential, not the darkness of failure, that frightens us. Being responsible for our actions creates fear. People fear success because they then need to be responsible for their actions. Most unsuccessful people prefer being unsuccessful. As long as they are struggling, they have an excuse to blame their lack of success on some other person or thing. The moment they become successful, they are responsible for their destiny and that scares everyone to death.

Fear forces us to challenge ourselves by saying, “Who am I to think that I am smart enough, talented enough, outright fabulous enough, or skillful enough to accomplish this task?” From experience, there are times you must rise to the occasion, defy all your past destructive beliefs and demons that hold you back, and say, “Nothing good can happen in my life if I start shrinking away from my potential. We are all meant to shine and reach our highest potential in whatever field we choose in our life, even if that field is trading.” Pretending to be a nobody or just another person in this world doesn’t serve you or the world. You must figure out your purpose.

It is in all of us, every one of us, to shine and reach our highest potential. As we develop the courage to attack our fears, we subconsciously give ourselves permission to start to achieve great things. We liberate ourselves from our own fears, and the courage we have to confront those fears begins to open the doors of success. Each time we face our fears, we gain strength, courage, and confidence in what we are attempting to accomplish.

Living and Trading with Fear – GREED AND FEAR CONTROL THE MARKET

GREED AND FEAR CONTROL THE MARKET – There are only two ways to live your life:

  1. In a state of fear, you maintain a feeling that everything you are learning or doing in life is not going to work out to your long-term benefit. Fearing that you just can’t do this or that, you make excuses every day about your life as to why you cannot achieve greatness.
  2. Believing nothing is impossible, you have a strong daily hope that you will figure it out. If it were not for having hope that you could figure things out, your heart would break. Without hope, people perish. You wouldn’t know what to do next in life if it weren’t for hope of achievement.

Learning to trade needs to be about merging your thought processes and emotions with the movement of the market—not with fear, but only with the constant hope that you can and will derive an income or return on your investment of time that you are spending at trading. Blindly hoping for success, however, will not lead to success. Too much hope as a beginner trader will place you in a position of being too creative and overcome dent. It can work against you. The saddest thing I have seen is overconfident traders who are quickly introduced to failure by not addressing the downside of trading and protecting themselves as they trade. That ignorance or lack of discipline creates fear the next time they trade. I have watched them as their dreams start washing down the financial drain due to stupid undisciplined decisions and mistakes, causing their money to slowly run out before they learn how to trade effectively.

Markets are driven by greed and fear. We get into the markets out of greed and get out due to fear. As fear is based on something that we think may happen in the future, it is clearly a mental process that tries to predict the future—in that sense, the reason for the fear is a projection of our mind. We can be afraid to fall, but once we are falling, we are afraid to hit the ground. Once we hit the ground, we may fear we are badly injured. Once we know we are badly injured, we may fear the pain and consequences of not being able to work for some time or becoming disabled. So one could say that fear is always based on something that has not happened yet and is, therefore, a fantasy of our mind rather than fact. In trading, fear has a large shadow, but it is really a small object to overcome and conquer. In life, as well as in trading, there are four ways to handle fear: you can go over it, you can go under it, you can even go around it, but to put fear behind you, enabling you to conquer your dream, you must walk straight through it.

Many traders are afraid to show the world who they really are. They fear that if they expose themselves the world may not accept them or like them, because that is all they have to offer. Inadequacy breeds doubts and fears. Learning a skill like trading can change that. It can breed confidence and courage. If you want to conquer your fear, do not simply sit and think about it; write down the things you fear the most and then put a plan in place of how you are going to tackle each of them. Go out and make it happen. By overcoming your fears, you change your outlook on life and even the outcome of your life. Don’t fear to step outside of your comfort zone. Do the thing you fear the most and keep on doing it; that is the best way to prove to yourself that you have conquered your fear!

In trading, there are two kinds of fear. One kind is the fear that prevents you from taking action. For example, if you are long without a stop and the market is falling like a rock, you need to take action and get out now! Another kind of fear is one of respect.

You must approach the market with a healthy fear and the utmost respect. To the unprepared, it can and will take all your money and drown you financially without any hesitation or guilt.

You can’t truly fear what you haven’t experienced. Your negative experience is the birth of fear in your soul. You block your dream of becoming whatever you are trying to achieve when you allow your fear to grow bigger than the faith or hope that you can accomplish what you have set out to do.

We get involved in trading because of excitement. We see a way to make money on our terms: staying at home; not having a boss, employees, inventory or receivables, or headaches; and making money 24 hours a day at our convenience. Then whack, your greed gets the best of you and you take your first loss—the money has gone right out of your account.

You say, “No problem, they told me about this.” Then whack, another loss and more money are gone. Now you’re a little concerned. Then comes another whack, another surprise, and even more money is gone. You are now taken aback and concerned.

Unlike losses in our daily lives, market losses are quick and non-negotiable. The money you lose is automatically taken out of your account. You have no say. The only things you have say over while trading is your decisions of entries and exits. When you lose in a trade, you see all this money gone and you are now scared and fearful. Your judgment is challenged. Your ego is challenged. Your self-esteem is challenged. Your common sense is challenged. More important, everyone you told about this is watching you and expecting a favorable report.

Embrace the Market with Caution – GREED AND FEAR CONTROL THE MARKET

GREED AND FEAR CONTROL THE MARKET – The next time you pull the trigger to trade, quantify your potential loss and then ask yourself, “Can I afford to take the loss should the trade not work out? Yes or no?” If the answer is no, don’t pull the trigger; it is that simple. Don’t get sucked in by your greed. Know your boundaries!

If the answer is yes, enter the trade and move forward hoping for the best and preparing for the worst. If you have set up the trade wisely, the worst thing that can happen is your quantified stop-loss order is hit and you lose a determined amount of money that you already decided you could live with losing.

If you are an active trader who is dealing with the fear of losing money, what are you going to do about it? Finding a simple productive trading strategy with a set of rules that you will be disciplined enough to obey will place you in a position of conquering your fear, providing you with the necessary confidence that will allow you to stop losing more money than you make. Either you control your fear, or your fear controls you!

The only way you can get back on track is to believe you can overcome your fear with courage while maintaining a positive attitude. Muster up all the courage you can find and move forward saying: “I don’t fear the market. I embrace it! I do have a fearful and healthy respect for it, so I refuse to succumb to any fear or greed. Losses are a part of this game, and I am going to turn my trading scars into trading stars. Nothing in this life or in this market is going to scare me. If it does, I am going to have the courage to address my fear and plow through it. This market or my life is not to be feared. It is only to be understood, and I can understand everything about it because I believe I am an intelligent human being. I came into this life and trading to succeed, not to be paralyzed by fear or tempted by greed but to conquer fear and greed and overcome failure.”

You will not become a good trader if you are plagued with fear. Fear is a mind-killer. It is the little-death that brings total obliteration and destruction to your trading. Fear is that dark room where all your negatives are created. Ultimately, you know that to develop into a successful trader, you will have to bring those negatives out of the darkroom and into the light to be exposed. You have to face your fear head-on with all the courage in the world, or it will start to control you and it won’t go away. You gain strength, courage, and confidence in every situation where you stop to look fear in the face. You must do the thing that you think you cannot do.

Security in the market is a superstition: it does not exist. When you get a little experience coupled with success under your belt, be careful because you can easily step into an arena of false security. That is why people drown in the ocean. They swim with insufficient respect for the ocean and a false sense of security that they are greater than the force of the ocean. What is amazing is the ocean meant no harm. It was just doing what it does on a daily basis. Like the ocean, the market exists with no feeling. So without proper respect and fear for the market, you too can drown financially. Trust me, the market will have no mercy! Why? It can’t feel and it can’t care. The only way you avoid danger in the market is to properly understand what the market is capable of doing to you.

Hope and Fear in the Market – GREED AND FEAR CONTROL THE MARKET

GREED AND FEAR CONTROL THE MARKET – Most traders are confused about how to use the terms hope and fear in the market and apply them backward. When the market is facing in the opposite direction, most traders immediately begin hoping it will come back. They hope and pray, then pray and hope, and then hope and pray some more, when in fact they should be fearing their losses, not hoping they come back. Now if in fact, the market does come back, they are quick to get out with a small profit because they fear the market will take away whatever profits they make.

I have seen traders enter into trades, watch the market move three weeks in the opposite direction going 2,000 pips against them, and pray and hope for those three weeks that it will come back. If the market does come back after they live in pain with sleepless nights for three weeks, they get out with 10 pips in profit due to the fear the market will take it back way from them. Wow! They risk 2,000 pips to capture 10. Not a good formula for trading success.

You see, they have their fear and hope mixed up and need to reverse their application in the market. They should be fearful of losses and quick to get out with a small loss if the market starts to move against them. Fearing your losses means protecting yourself at all times and trading with tight protective stop-loss orders. If a trade starts to go their way and run in their direction, they need to let it run, hoping it will keep running. A successful trader needs to fear his losses and hope that his profits run.

Hoping your profits run means understanding where the market is going in a larger time frame and then entering on a smaller time frame, quantifying your losses on the smaller time frame and then projecting your profits on a larger time frame. Let it run! Don’t fear that the market gets to your target—hope it gets to your target.

You must have hope in every trade. Without it, trading would be miserable. True hope dwells on the possible, even when you feel trading seems to be a plot written by the market, which you believe wants to see how much misery and adversity it can give you just to see if you can overcome it. While the market fluctuates during our trades, we go through the emotions of fear, excitement, hope, and greed. Once the market returns back to break even, or even rallies 5 or 10 pips in our favor after we go through such hell, we once again fear that the market is going to take those 5 or 10 pips away. However, we must fear our losses and let our profits run. When the market gets back to our break-even, we need to let it continue to move in our direction with hope, not fear.

Here are some questions to ponder, pause and reflect:

  1. When you trade, are you more fearful or hopeful?
  2. Do you enter trades feeling more fearful or more hopeful?
  3. Do you consider yourself to be more optimistic or more pessimistic? If you consider the world a cup, is yours usually half empty or half full?

If you are pessimistic, there is a high probability you will be filled with fear and thoughts of failure when trading. You will trade with the mindset of expecting the worst and will have a high probability of subconsciously setting yourself up for failure. When you are in fear of failure and constantly think about failure, failure usually becomes the end result, as we think about usually happens. More important, because you are so consumed with the thoughts of failure, you will subconsciously miss a detail that will blindside you and hurt you financially.

The opposite takes place if you are optimistic, are filled with hope, and avoid thoughts of greed. You will have a high probability of succeeding in your trades. When you learn the emotional skills involved in trading, you will allow yourself to be calm, maintaining your sense of logic and emotional intelligence from your training.

Hope sees the invisible, feels the possibilities, touches the realities, and achieves the impossible. With hope, you can clearly see your future success while blurring your past failures. Hope sees the sunshine, while fear and failure see the storms.

Hope is not the conviction that something will turn out well, but the certainty that something (the formula) makes sense regardless of how it turns out. There are no hopeless situations in trading, only hopeless traders who allow their belief systems to go bad. Trading is a lot like football. You have to tackle your problems, block your fears, and score your points when you get the opportunity.

Conclusion – GREED AND FEAR CONTROL THE MARKET

Humans are complex beings, and their habit is not to keep things simple. They believe value is added if they can complicate the process, whether through their systems or emotions. They feel they are gaining value when they are creative, making new rules or taking greedy risks, going against their training. Some traders want to add more bells and whistles to their systems instead of following what they’ve been taught. More rules make them feel important. In reality, they are going in the wrong direction.

Don’t reinvent this wheel. Don’t waste your trading experience creating new systems and strategies. They have already been created by some of the best traders in the world. No need to give birth to doubts and fears from your own creations. Spend your time educating yourself both technically and emotionally, so you can deal with the roller-coaster of greed, fear, and hope in the market. Spend your time figuring out a simple strategy that constantly works. If you want success, keep it simple, avoid greed, confront your fears, and hope for the best. When you become good at a strategy and when you learn to trade with confidence, it is then that you should not be afraid to go out on a limb, because after all, that’s where the fruit is.

By: Jared F. Martinez

you can develop your skills in a risk-free environment by opening an FBS demo account.

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