Fear, greed, hope and revenge trading

Four feelings show up at the moment of a trading decision, and each has a typical move.

Fear cuts winners short ("sell at +30, it might turn") or skips a trade the plan allows. Greed inflates size after a few wins or deletes the target because "it can go higher". Hope holds a loser and moves the stop away, because "it'll come back". Revenge raises the stakes right after a loss, to win it back fast; that move is called revenge trading.

None of these is a character flaw. Everyone feels them, careful traders included. The trouble starts when the feeling makes the decision instead of the plan written earlier (A one-page trading plan).

A useful habit: most people spot these feelings in others long before they spot them in themselves. So don't trust "I'm not emotional"; trust the journal, where each feeling leaves a recognizable trace in sizes, stops and exit times.

Nora's plan on the Pebble practice account: 100 at risk to the stop and a target at twice that, 200. Her last 20 trades: 12 winners, a 60% win rate, which feels great.

The result column says otherwise. The 12 winners add up to +871, an average of 72.58. The 8 losers add up to −1,351, an average of 168.88. Net: −480 after fees.

This is the win rate and payoff idea from Win rate and reward-to-risk in module 4 seen from the human side. The plan was built for wins about twice the size of losses. In practice the wins came out at less than half the size of the losses: the plan's numbers were turned upside down by how trades were closed, not by the entry rule.

So the first question for any log is never "how often do I win?" alone, but "how big are my wins compared with my losses?"

Fear shows up in a log as early exits. In Nora's 20 trades, 10 winners carry the note "took a quick profit". Together they made 475, an average of 47.50 a trade. The 2 winners left alone until the target made 198 each.

Each early exit felt sensible at the moment: "+40 is better than nothing, it might turn." Added up, they are why the average win shrank to 72.58 against a plan built for about 200.

An early exit is not wrong in itself. It is wrong when fear invents it during the trade. An exit written into the plan before the trade, a target or a time limit, is fine even if it sometimes sells early, because it is the same on every trade and can be counted.

The test for a journal line: was this exit in the plan before I clicked? If not, write down the feeling next to it.

The other half of the pattern is how long each kind of trade was held. A journal column with days held turns a vague feeling into a number.

Nora held her 8 losers for 7, 4, 6, 7, 6, 4, 6 and 10 days: 50 days in total, 6.25 on average. Her 12 winners were held 25 days in total, about 2.08 each. Gains were grabbed within two days; losses were given six.

That asymmetry is the signature of hope. A loser that has reached its stop gets "a bit more room", then a bit more, because closing it would make the loss real. Each extra day feels like a chance; in the log it shows up as bigger losses held longer.

When you review a journal, compare the average holding time of winners and losers. If losers are held much longer than winners, the stops are not doing their job, whatever the plan says.

Loss aversion, in plain words: a loss hurts more than a gain of the same size pleases. Losing 100 feels worse than winning 100 feels good. Studies of decisions keep finding this in most people; it is a normal feature of how people weigh outcomes, not a beginner's weakness.

In trading it pushes in two directions at once. A small open gain feels fragile, so you lock it in before it can vanish: early exits. An open loss is still "only on paper", and closing it would make it real, so you postpone that: wider stops and longer holds.

The result is the shape of Nora's log: many small wins and fewer, bigger losses. A plan built to win about twice what it loses ends up winning less than half of what it loses, with a 60% win rate and a net loss.

You can't switch loss aversion off. You can only make the exit decisions before it arrives.

Hope's typical move is to push the stop further away "to give the trade room". The fix is a rule written while calm: the stop may move only toward profit, never away from it. For a long trade, up only; for a short trade, down only. It builds on the stop from The stop: where it goes and why in module 3, which is set before entry.

Example: long from 50.00, stop 48.00, price now 53.00. Raising the stop to 50.00 is allowed: the worst case becomes about zero plus costs. Moving it to 46.00 or 47.00 is not, whatever the reason sounds like ("it bounced there last week"). Removing it is not either.

The rule works because it removes a decision from the worst moment. At the stop, hope always has a reason. A one-way rule doesn't ask for the reason; it simply has no option for "a bit more room".

A feeling becomes manageable once it has a price. To price hope, replay the trades it touched as if the plan had been followed.

Six of Nora's losers carry the note "moved the stop and waited for it to come back". They lost 227, 222, 192, 162, 167 and 177: −1,147 in total. At the planned stop each would have lost 102 with fees: 6 × −102 = −612. Hoping cost 1,147 − 612 = 535.

Add that back to the month: −480 + 535 = +55. Same entries, same quick profits, only the six stops respected, and the log turns from a loss into a small gain.

Two honest limits. 20 trades prove nothing about the plan itself; it takes far more trades to judge it. And the replay is a "what if", not a promise. What it does show precisely is where the feelings cost money, and that is where a rule belongs.

Feelings at the button can't be switched off, and they don't need to be. What works is moving each decision to a calm moment, before the feeling arrives.

Three habits do that. Stop and target go in with the order, so the exit is decided before there is any open gain to fear for or open loss to hope about. The feeling goes into the journal next to the trade ("closed early: fear"), so the pattern becomes visible over weeks. A pause after a loss, so the revenge urge passes before the next click.

Habits that look like control do the opposite. Watching the open result every minute hands fear and hope more chances to act. Doubling the size to win a loss back is revenge trading under another name.

How it fits together: four feelings, one mechanism (loss aversion), one log where they cost 480; decide exits early and price each feeling. Next lesson: why a run of losses is normal and how to tell it from a broken plan.