The first entry in Google when one enters the word “greed” is the dictionary definition: “Greed means avid desire for gain or wealth (unless some other application is indicated) and is definitely uncomplimentary in implication.”
We all feel that is not flattering to call someone greedy but often, in the world of financial markets and competitive economies it has been seen not only as something inevitable but also as a legitimate force for success and development.
Having the desire and drive to make profits is natural and necessary in investing but greed is a desire in excess and excessive emotional states never have a consistently positive effect on anything, trading and investing included.
Greed is a blindfold that we wear and walk happily thinking that the world is ours. The road, however, is full of holes and rough patches so we need to be alert and careful. Occasionally, we all become greedy because due to our human nature, we have an innate tendency to seek pleasure and gratification.
Greed may lead a trader to:
- Take trades he never planned to, just because he had a recent winning session or because the markets have moved towards his predicted direction
- Run winning trades longer, beyond his take profit levels hoping that he can make more profit
- Impulsively increase position size, contrary to his trade plan, disregarding his previously set levels.
These actions may potentially be detrimental to trading and our balance.
We must learn to become aware of our mind’s greedy, tempting suggestions and work on being able not to always obey them. Our mind often confuses us and messes with our plans, goals and values. This is is its nature as we explained in our Understanding the mind section. Mindfulness practice is a vital step in cultivating greater awareness of our thoughts, emotions and desires and learning to respond to them differently, in a way consistent with our aims and values.