V.9:1 (27-28): Managing Emotions And Money by Robert J. Hamilton

Managing Emotions And Money by Robert J. Hamilton

The pitfalls of trading are well known to investors as well as traders. As perils go, the star performers by far and away are hope, fear and greed. The mavens of trading theory agree that avoiding these pitfalls will lead to successful and profitable trading. The problem is, the mavens never tell you how to avoid those pitfalls successfully. They don't even tell you how to get a good commission discount.

Successful option and commodity traders usually won't admit the "h" word—hope—to their trading vocabulary. They know that whenever you get into the hope mode, your position is usually terminal and it may very well end up a loser. When you have a position that is in trouble, the hope of not wanting to take a loss or wanting to at least break even will many times cause you to neglect sound capital management of limiting risk. More often than not, that hope will betray you and you will only take a bigger loss later. Most successful traders have had to deal with this affliction at one time or another. If you persist in this hope syndrome, ultimately, it will devastate you.