Trading as a Business Introduction I

April 25, 2006

Prologue: Where to Begin

by Charlie Wright

Let’s begin with the markets themselves, and with fear and greed. We have all
heard the cliches about fear and greed. They rule the markets. In fact, that’s all the
markets are—a reflection of these emotions. In order to make money trading, you
must learn to control your fear and greed.
Overcoming Fear and Greed
We all have to deal with our runaway emotions at various times in life, and these
emotions really begin to run away when we trade. Bill Williams1 used to say in his
seminars that trading was the clearest window into your own personal psychology,
clearer than any other endeavor. I think he was right.
UNDERSTANDING THE MARKETS
We give in to our fear when we don’t take the next trade because we’ve just been
through a string of losers and fear losing again. We give in to our fear when we
put our stop loss too close and get stopped out of a trade without giving the trade
enough room to develop. We give in to our fear when we freeze as a trade starts
to lose money, and we don’t take the exit signal because we’re afraid of losing
money.
We give in to our greed when we take a profit early, before the regular signal,
because we don’t want to give back any of the profits. We give in to our greed
when we trade more contracts or shares than we normally would because we feel
good about this trade.

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