FEAR OF LOSS
This sounds like a valid strategy, but it is not. It’s flawed because it’s too slow. Often, the wrong indicators are used at the wrong time or for the wrong reasons. The end result is that novice traders often pull the trigger far too late.
Entering late is a stressful endeavor. The forex market moves in waves. Even if the trend is down, price will move two steps down, one step up, then three steps down, then two steps up, then down again, and so on.
A novice trader who enters late inevitably enters a short trade just seconds before price moves back up. This can put the trader at a quick loss of 20 or so pips. Then he panics and gets out just before the price returns to the downtrend. The analysis was correct; price will fall. However, the timing of the entry was poor.
The exit was emotional, based on the fear of loss. So fear of loss is present in both entries and exits. The trade was disastrous. Unfortunately, it is all too common for new traders.
You’d think professional traders would be a lot better at controlling greed and fear, right? Wrong. They just have the opposite problem. Professional traders are much more experienced at the timing of their entries. They also have a strong understanding of the underlying fundamentals. Therefore, they are better at picking the right direction and getting in.
However, professional traders are always working at letting their profits run. It’s harder than you’d think. Professionals have fear of profit. It’s true! ...