The real challenge for most of us is to stop living in the past. A loss is a tough thing to get over, and the bigger the loss, the tougher it gets. But getting over a loss is not the only problem. As odd as it may be to read or hear, you often have to forget about your big winners as well. The most effective traders seem to have a short-term memory. In other words, the best traders only see the trade they are about to enter, or the one they are currently in. The rest are out of sight and out of mind. Why is that the difference between successful and unsuccessful traders? Successful traders are wise enough to know that fear and greed can lead them down the wrong path. But what do fear and greed have to do with putting past trades out of your mind?

Fear does not operate in a vacuum. It is a learned response to a particular event or probability. In the case of trading, when you have a trade that goes bad, the regret and frustration can carry over into the next trade. It is a very common human response. Or worse, the fear is so consuming, that you do not enter your next trade. Of course, when you are in this mindset a trade you do not enter is the one you should have entered, which only compounds the fear and frustration. This particular problem is fueled by the expectation that every trade you enter should be profitable. If you believe this, either stop thinking it or stop trading. It is that simple, not ever trade will be profitable. Greed creates the opposite problem. With a couple of consecutive winning trades, all of a sudden we can do no wrong. This will ultimately lead you to trades that you normally would not have entered. Finding good trades is hard enough, while finding poor trades seems to get much easier after a couple of winners. Never mistake genius for a little luck.

The power of these emotions in wrecking your trading can be summed up in one sentence, “Fear blinds us to opportunity, greed blinds us to danger.” It is important to recognize that you must develop a very un-emotional, logical mindset in order to succeed in trading the market. Work on keeping your emotions out of your trading decisions and you will become a better trader.

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