How to Take Advantage of Fear and Greed in the Market

We’ve all heard the phrase, “buy low, sell high.” But what about “fear and greed?”

Most of us already have a sense that “fear and greed” create movements in market prices. But it’s wrong if you think “fear and greed” are a hindrance to successful trading. In fact, the  opposite is true.

You’ve heard Gordon Gecko’s famous line, “Greed is good!” In our case, greed is what leads to speculators making huge, low-probability bets . . . bets that have a probability hovering around 20% to 30%.

Greedy speculators seek quick, lottery-ticket-type gains. As options sellers, we know that those type of returns are rarely achieved. We make good profits by taking the other side of those trades.

You also need to avoid being too greedy when exiting your trades. All research points to taking off profits early. Don’t be greedy by trying to make every last penny. Often, holding on for greater gains leads to unmitigated disaster. Don’t do it!

I’ll be discussing the tactics I use to enter and exit a trade in my upcoming webinar on Tuesday, July 31 at 12 noon ET.

As for fear, it can be positive and negative.

First of all, options traders love when fear enters the market.

When fear enters the market, demand for options increases. The increase in demand leads to an increase in options prices. It’s simple supply-and-demand economics. More demand equals higher prices. Options are no different.

So, we welcome fear. Fear is what led to our substantial gains in 2018 while the overall market has remained relatively flat.

On the other hand, too much fear can stop you from entering a trade even when the probability of success is high. To overcome this fear, it’s best to start small.  Trade small – one or two contracts – or even paper trade.

Paper trading is something that most traders don’t like doing before they first start to trade for real because they want to get out there in the markets and pull in profits as quickly as possible. Resist that temptation and learn the strategies before putting your hard-earned money to work!

Starting with just a few contracts, or paper trading, will help you pull the trigger and commit more easily when the time comes to trade for real.

The only issue with paper trading is that you are not able to experience the emotions of trading as you do when trading with your own hard-earned money. Therefore, paper trading has limitations. That is why you want to quickly introduce a contract or two to the mix once you have the basics of the strategy down.

Using safe money management techniques also helps you to overcome the fear of entering trades. The exact money management rules you use will depend on the strategies you choose. Generally speaking, a good rule is to use no more than 5% to 10% of your initial trading capital per trade, if not less. It truly depends on the amount of capital you have and your own risk tolerance.

Yes, you can make lots of money trading my strategies and with my proven trading system. But remember that it’s a marathon, not a sprint. You must have realistic expectations and not give in to too much greed.

A little greed is good, or you would never enter a trade! But not being too greedy means you will happily take profits when our strategy tells you to.

Finally, using a proven trading system will also reduce your fear when entering trades. Learn more at my webinar on Tuesday, July 31 at 12 noon ET.

I will introduce the strategies and the proven trading system that have generated significant gains in 2018. These are strategies that take advantage of the ongoing heightened levels of fear and greed in the market. Click here to join.

Published by Wyatt Investment Research at