Fear, greed and FOMO
What fear does to a position that is still working
Fear shows up as a tightening in the chest when the price moves against a position. The position is still inside the plan. The stop has not been reached. Nothing has gone wrong yet. The body reacts as if something has. That reaction is the thing to notice, because it arrives before any fact changes.
The common action is to close early. A planned risk of R2,000 becomes a realised loss of R500. That looks like caution. It is not. The trade was sized so that R2,000 could be lost without damage. Closing at R500 does not reduce the risk of the plan. It replaces the plan with a smaller, unplanned loss and removes the chance of the recovery the plan allowed for.
Fear also changes what a person sees. A normal dip starts to look like the beginning of a larger fall. The chart has not changed. The stop distance has not changed. Only the reading of it has. A written stop is useful here because it was decided by someone who was not afraid at the time. That person is a better judge of the trade than the one watching the price move.
What greed does after a position is already ahead
Greed is quieter than fear. It arrives when a trade is in profit and the number on the screen starts to feel like a starting point rather than a result. The thought is that the move has more to give and the size is too small to capture it. Adding to a winner is the usual action, and it is usually done without a new stop.
The arithmetic of that is simple. A position that was sized for a R2,000 risk becomes a position sized for more, but the stop stays where it was. One candle against the enlarged position can remove several days of gains. The trade that was working has been converted into a trade that is too large for its own stop.
Greed also stretches targets. A plan with a target 400 points away becomes a plan with a target that keeps moving. The exit is never reached because it is never fixed. A target written before entry is the only one that can be hit. A target chosen while the price is rising is chosen by the same person who wants the price to keep rising.
What FOMO costs at the moment of entry
FOMO is the state of entering because the price is moving, not because the plan said so. The entry price was written down. The price has left it. The trade no longer exists in the form that was planned. Buying anyway is not entering the plan late. It is entering a different trade with the same stop and target.
The cost is visible in the numbers. A planned entry at 18.4100 with a stop at 18.3900 risks 200 points. Buying at 18.4200 with the same stop risks 300 points. The target at 18.4500 is now 300 points away instead of 400. The reward-to-risk ratio falls from 1:2 to 1:1. The setup did not get worse. The entry did.
FOMO feels like missing out. It is more accurate to call it paying extra. The extra 100 points is paid at entry, before the trade has done anything. On 0.10 lots that is about R1,000 of additional risk for the same target. The price being watched is not a signal to enter. It is a signal that the planned entry has passed.
One setup, two entries: R1,000 apart
| Step | Amount | Note |
|---|---|---|
| Planned entry | 18.4100 | Price reaches the level written in the plan before the session starts. |
| Planned stop | 18.3900 | 200 points below entry, equal to about R2,000 on 0.10 lots. |
| Chased entry | 18.4200 | Price has already moved 100 points up; the reader buys now. |
| Stop on the chased trade | 18.4000 | Same 200-point distance, but from the worse entry. |
| Cost of the chase if stopped | R2,000 | The planned trade would have been stopped at 18.3900 for about R2,000. The chased trade is stopped at 18.4000, also about R2,000, but the planned trade could still be running. |
Your broker may quote a slightly different price, round the pip value, or charge a spread on top. Those details vary between brokers.
Doing it once, step by step
Work through these once, in order, before opening a chart. The aim is to have the three numbers written down before any price is seen.
- 01
Write the entry price
Decide the exact price at which the trade is valid. Write it down. If the market is not at that price, the trade does not exist. This single line removes most FOMO entries before they happen.
- 02
Write the stop price
Place the stop where the reason for the trade is wrong, not where the loss feels comfortable. Measure the distance from entry to stop in points. That distance is the risk per unit, and it is fixed before entry.
- 03
Write the position size
Convert the stop distance into rand. On USD/ZAR, 0.10 lots moves about R10 per 0.01 of price. A 200-point stop on 0.10 lots is about R2,000. Choose the size so that this number is one the account can absorb.
- 04
Write the target price
Set the target before entry and leave it there. Measure the distance from entry to target in points. Compare it with the stop distance. If the reward is not clearly larger than the risk, the trade is not worth taking.
- 05
Check the price against the entry
Look at the chart only after the four numbers are written. If the price is at the entry, the plan is live. If it has moved past the entry, the plan has expired. Do not adjust the entry to match the current price.
- 06
Record what happened
After the trade closes, note which of the three states was present. Fear, greed and FOMO each leave a trace in the decision. Naming the state is how the next plan gets better. The numbers do not change between brokers, but spreads and pip values vary, so check the contract specification with the broker.
The mistake most people make here
The mistake is treating a moving price as a signal to enter, rather than a signal that the planned entry has passed. Fear makes people close a trade early when it dips, so a planned R2,000 risk becomes a R500 loss and a missed recovery. Greed makes people add to a winner without a new stop, so one bad candle removes several days of gains. FOMO makes people buy 100 points late, which turns a planned 1:2 reward into a 1:1 trade or worse. The fix is a written entry price, a written stop and a written size before the chart is opened. If price is not at the entry, the trade does not exist.Check yourself
USD/ZAR is at 18.4100. You plan to buy at 18.4100 with a stop at 18.3900 and a target at 18.4500. On 0.10 lots, what is the planned risk in rand, and what is the planned reward?
The stop is 200 points away. At about R10 per point on 0.10 lots, risk is 200 x R10 = R2,000. The target is 400 points away, so reward is 400 x R10 = R4,000. The plan risks R2,000 to make R4,000.
You miss the entry and buy at 18.4200 with the same 18.3900 stop and 18.4500 target. What is the risk and reward now?
The stop is 300 points away, so risk is 300 x R10 = R3,000. The target is 300 points away, so reward is 300 x R10 = R3,000. The same setup now risks R3,000 to make R3,000, which is a worse trade than the plan.
Questions that come up next
If I close a trade early because I feel afraid, is that always a mistake?
It is not automatically wrong, but it is usually a break from the plan. If the plan was written before the chart was opened, the stop and target were chosen for a reason. Closing early turns a planned R2,000 risk into a smaller, unplanned loss and removes the chance of the recovery the plan allowed. The exception is when new information changes the trade, not when the price simply moves against you.
How do I know if I am adding to a winner out of greed?
The tell is whether you wrote a new stop for the added size. If the stop stays where it was while the position grows, the trade is now too large for its own stop. One candle against the enlarged position can remove several days of gains. Greed is quiet, so the check is not how you feel but what the numbers say.
What is the rand cost of entering 100 points late on USD/ZAR?
On 0.10 lots, a 100-point move is roughly R1,000. If you buy 100 points above your written entry, your stop is now 100 points further away, so your risk on the same trade rises by about R1,000. Your target is also 100 points closer, so the reward falls by the same amount. The trade you take is not the trade you planned.
Does a written plan stop me from feeling fear, greed or FOMO?
No. The feelings still arrive. A written entry, stop and size give you something to check against when they do. The plan was made by someone who was not afraid or excited at that moment. That person is a better judge of the trade than the one watching the price move.
What should I do if the price has already left my planned entry?
The trade as planned no longer exists. You can wait for the price to return to the entry, or you can write a new plan with a new entry, stop and target. What you should not do is enter at the current price and keep the old stop and target. That turns a planned 1:2 reward into a 1:1 trade or worse.
Why does the same 100-point move cost me more when I chase?
Because your entry price sets the distance to your stop. If you buy 100 points above your plan, your stop is 100 points further away, so the risk in rand is larger. Your target is also 100 points closer, so the reward is smaller. The market did not change the value of a point. Your entry changed your distance from both the stop and the target.
The words used on this page
- stop
- A pre-set price at which you close a losing trade to limit the damage. It is written before you enter. Once the price reaches it, the trade is closed.
- target
- A pre-set price at which you plan to close a winning trade. Like the stop, it is decided before entry. A target that keeps moving is not a target.
- lot
- A standard unit of trade size. On USD/ZAR, a 0.10 lot moves about R10 for every 0.01 change in the price. The larger the lot, the larger the rand move.
- entry
- The price at which you open a trade. In a written plan, it is a specific number, not any price that happens to be on the screen.
- FOMO
- Fear of missing out. It is the urge to enter a trade because the price is moving, not because your plan said so. The entry price was written down, and the price has left it.
- risk
- The amount you can lose if the stop is hit. It is measured in rand before you enter. On 0.10 lots, a 200-point stop is about R2,000.
What to take away
- Fear, greed and FOMO are the three states where you break your own rules. Each one has a physical feel and a rand cost.
- Fear closes a working trade early and turns a planned R2,000 risk into a R500 loss. Greed adds size without a new stop, so one candle can remove days of gains. FOMO buys late, turning a planned 1:2 reward into 1:1 or worse.
- A written entry, stop and size before the chart is opened is the only defence. If the price is not at the entry, the trade does not exist.
- The same 100-point move costs the same whether you planned it or chased it. The difference is what you do next.