You want to get your money back! So, you re-enter at C, just before the price starts to fall again. Given your past experience, you hang on through the next dip and it pays off, you are now showing a small profit but it drops again so you hang on again at the next fall but it carries on falling. You sell at D for a big loss and blame the market or believe you have been really unlucky.
You have suffered two losses when you should have made good profits. You feel angry that the market has done this to you.
This is exactly what most people do without a
clearly defined trading strategy!
Remember that it was you who made the trading decisions based on the emotions of fear and greed – no one else. And the market doesn’t even know you exist let alone engineering things to make sure you lose. Remember that fear includes the fear of being left on the sidelines when you could be making money.
Trading emotionally is a recipe for disaster.
The way to overcome the fear and greed decisions is to trade to a set of rules (your trading strategy) that tell you what to do and when to do it. The more mechanical we can be when we trade the less we are likely to let emotions get the better of us.