To my mind, I think behavioral finance plays an important role in the markets. All players are subject to their emotions, including two that seem to be the basis of each decision: fear and greed.

Everyone is indeed afraid of losing, although everyone reacts differently to each situation. That's why most people are struggling to cut their position when they lost even if their strategy was fixed in advance. It is often said "it will go up" or "I leave I would see how that evolves" and that is often the best way to lose a lot more! It is for me the reason for the downfall of certain individuals who have failed to be disciplined enough to meet their trading plan. You need to know when to cut one hand sometimes ... Obviously this is not the only factor but one of the key anyway.

Another important factor seems to be greed. A lot of people still believes that a single trade can make them rich. The market is never only up or down. The problem is that once reached a certain level of profit, if the price makes a reversal then, we often expected that the price get back to its highest or its lowest before deciding to close its position. Again it is a serious mistake. We must adapt according to the evolution of the trade and that's why it is always better to function with a moving stop. Thus we can take advantage of the movement and be sure to win at the end (of course if the price went to the right side at the beginning ..). Whether you don't do it, the trade often ends up with loss because we do not sell until the price returned to the desired point (which is not often the case ..) and a trade which started with profit, become a losing trade.

That seemed me important to talk about that

Tell me what you think