Fear and Greed — Just Symptoms. Where Is the Real Risk Hidden?

Introduction: the myth of fear and greed

Ask any beginner or even an experienced trader: what is the main enemy in the market? Nine times out of ten you will hear the same answer: fear and greed. These emotions, they say, ruin strategies, force traders to close trades too early or enter the market at the very peaks.

But is it really so? Yes, emotions play a huge role, but they are only a symptom. Fear and greed are a trader’s reaction to misunderstanding the processes happening in the market. And the real enemy of a trader lies much deeper. Let’s figure out what emotional trading is and why it’s so easy to fall into its trap.

Emotional trading: how fear and greed control you

Emotions in trading are inevitable. They are part of every one of us. Even a trader with twenty years of experience managing millions can experience a panic reaction when the market behaves “against the rules.” But for beginners, emotions become the only filter for decision-making.

Fear is probably the strongest emotion in the market. It manifests in different forms:

• Fear of entry. You see an entry point into a trade but hesitate: what if it doesn’t work out? What if the entry point is wrong?
• Fear of mistake. The trade is open, the price goes “against you,” and instead of working according to the plan, panic kicks in — you close the trade without arguments, emotionally, because you are not confident in yourself.
• Fear of missing out. The so-called “missed train” syndrome — you enter a trade too late when the main move has already happened. This is the classic FOMO (Fear of Missing Out).

Greed is the reverse side of fear. It also forces traders to break rules and forget about strategy.

• Greed of adding. “The coin has already done +50%, but it will surely give another X2!” — and as a result, the trader loses money.
• Greed of holding. The trade is in profit, but you delay fixing the profit until the very last moment, and eventually the gain turns into a loss.
• Reluctance to lose. You open a trade, but the price goes against you. You add more volume hoping that such “averaging” will improve your entry point. But this only leads to an increase in losses. In the end — either you lose much more than planned, or you get liquidated altogether.

Fear and greed force irrational decisions: selling assets at the bottom, buying at the top, and breaking any risk management. But if you dig deeper, it turns out that emotions appear because the trader doesn’t understand what is happening in the market.

These emotions appear only because there is nothing to counterbalance them. If traders had information about what is actually happening (demand and supply analysis, understanding whether a deficit or surplus has formed), there would be far fewer deposit-destroying emotions.

Where does the problem actually lie?

Many believe that emotions are solely to blame. In fact, fear and greed are only consequences. The real mistakes lie in four key areas: what to trade, when to open, how to manage risk, and when to close a trade.

1. What to trade?

Wrong choice of asset

One of the most fatal mistakes beginners make is investing their entire capital into a single asset. A person hears the story “someone bought coin X and became a millionaire” and thinks that this is a strategy. As a result, all the money is invested into one coin, without diversification. If the asset doesn’t meet expectations, the account goes deep into the red. Most often such a position gets stuck at -60% or -70%, and the trader holds it, hoping for a “miracle,” instead of admitting the mistake.

Incorrect analysis

95% of traders look only at the candlestick chart and don’t understand that the market moves exclusively due to supply and demand.
Price rises → they buy.
Price falls → they sell.
This is reflex behavior, not analysis. The lack of understanding of volumes, delta, and liquidity leads to late and chaotic trades.

2. When to open?

• Fear of entering a trade. The trader sees an opportunity but is afraid: “what if the price goes against me?” As a result, the moment is missed, and the price moves in the predicted direction.
• Is the entry point correct? Due to insecurity, the trader constantly doubts: “is my entry point correct?” The absence of an analysis system turns every decision into a painful choice.
• “Missed train” (FOMO). One of the most common mistakes is buying “at the highs.” The trader sees that the asset has already grown by hundreds of percent, but still wants to take at least some part of this move. Hoping for continued growth, he enters the trade too late. Result: after a small rise, the market reverses, and the position brings a loss.

3. Risk management

• Loss size (reluctance to lose). Fear of loss is not emotion but the result of lacking a plan. The trader does not set a predetermined “acceptable loss size” and is not ready to accept it.
• Not ready to accept loss. The trader continues to hold the position even if it goes deep into the red. Instead of placing a stop-loss and limiting losses, he waits for a reversal that may never happen. As a result, the loss turns from a planned acceptable one into a catastrophic one.

4. When to close?

• When to close a trade (underprofit). The trader fixes profit too early, fearing that the price may reverse at any moment. As a result, the trade gives minimal profit, although it could have brought much more.
• Stop triggers and the price goes in the predicted direction. A classic situation: the trader opens a position correctly, but his stop is hit, and afterward the price moves exactly where he initially expected. The problem here often lies not in emotions but in incorrectly setting the stop and lacking a well-thought-out position management system.

These mistakes are not the result of “bad psychology,” but the consequence of lacking market understanding and lacking a strategy. If there is no system for choosing an asset, analyzing the entry point, clear risk management rules, and an exit plan, emotions automatically become the main “advisor.”

Read the continuation in the article “4 Real Reasons for Losses in the Market.”

Conclusion

Emotions do indeed prevent traders from making rational decisions. But they are only the tip of the iceberg. The real enemy in the market lies in the absence of a system: asset selection, clear rules of entry and exit, understanding of supply and demand, and risk management. Where there is no structure, fear and greed become the main advisor. Where there is strategy and an understanding of market mechanics, emotions lose their power. The real protection of a trader is knowledge, system, and discipline.

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