Human emotion is definitely the one true factor causing punters and investors to lose money. Most of the time we either react too fast to close off the position once things started going south, or we react too slow telling ourselves to stay calm and ride out the tide.
The huge question of WHEN is the optimum time to buy or sell begets another paradigm of investing: Timing the Market. Nobody can time the market without external aid, and most of the so called external aid are illegal e.g. insider info etc etc. So i had this sudden thought, rather then timing the market, why not we time our emotions?
Trade only when you feel calm and alert. Infact put in a stop loss and a limit, then go to sleep or surf the net or whatever can keep yourself occupied. Sometimes this kind of behaviour regulates your anxiety and removes the urge to either cut loss too early, or continue with a doomed trade.
Set a stop loss and limit range according to your own risk preference. For conservatives, 5% would be a good start, and for the berserkers a 20% might work better. So all in all, once setting up the ranges, your earnings effectively falls back on how many positive trades you've made, focusing on only a single variable that will affect your trade.
Remember this: The less variables in a trade, the higher your chances of scoring a profit.
Trade point: Market closed today, but i anticipate EUR/USD to gap down on Monday when market opens, thanks to Moody's Greek Default declaration.
