Fear, greed and FOMO
What you learn in 3 minutesA reader asked: why do I keep breaking my own rules even when I know them? This lesson shows the three states where that happens: fear, greed and FOMO. Each one has a physical feel, and each one has a rand cost. On USD/ZAR at 18.4100, a 0.10 lot moves about R10 per 0.01 change in price, so a 100-point move is roughly R1,000. That number is the same whether you planned the trade or chased it. The difference is what you do next.
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.
The mistake 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.