What are common mistakes with Greed?

Greed: definition before the consequences

Greed is a persistent drive to get more than what is reasonably justified by the situation. In trading psychology, it usually shows up as wanting larger profits, quicker recovery, or higher confidence than evidence supports. Greed is not the same as ambition: ambition can coexist with limits and a defined process, while greed tends to treat limits as obstacles.

How greed changes decisions (mechanics)

Greed can distort decision-making through a few predictable mechanisms:

Plan override: A trader begins with a rules-based plan (entry criteria, sizing, exit conditions), then adjusts behavior to “improve” the outcome. The adjustment often starts small, then becomes the new norm.
Reward inflation: The mind prices future returns higher than current information supports. Even without changing strategy, greed can push for more exposure.
Information distortion: Greed increases selective attention. Good signals feel meaningful, while weak parts of the evidence get minimized.
Loss reframing: Losses can be mentally reclassified as fixable glitches. That can reduce willingness to stop or re-evaluate assumptions.

These mechanics are stable psychological patterns. The actual results still depend on variable market conditions, execution quality, and costs, which can change from trade to trade.

Common mistakes tied to greed (with neutral checks)

Here are mistakes people commonly make when greed is active, plus neutral ways to check what is actually happening:

Mistake: Increasing size to “earn back”. A trader moves from “follow the plan” to “force a better outcome.” Neutral check: write the original sizing rule and compare it to what was changed.
Mistake: Ignoring total friction (costs and execution). Greed can make the target feel large enough to “cover” overlooked spread, commissions, or slippage. Neutral check: list all assumed costs for the example and recalculate net impact. If results flip after adding costs, the greed-driven assumption was doing work.
Mistake: Treating near-misses as proof. Greed can interpret “almost” outcomes as evidence that the next attempt will be better. Neutral check: separate performance you can explain from performance you cannot. Ask what would falsify the belief.
Mistake: Delaying exits to wait for a bigger payoff. Greed can stretch time in the hope of a larger result. Neutral check: compare actual exit timing to the predefined exit rule, then examine whether the rule was changed because of emotion.

A worked-style example (assumptions stated)

Assume a trader has a process that caps losses per trade at a fixed fraction of account and uses a defined exit point. If greed leads them to increase position size after an adverse move, their loss in account terms becomes larger than planned. If they also postpone the exit to “reach the hoped-for profit,” the loss-versus-plan gap can widen further. This illustrates the failure mode without claiming any specific market outcome.

Limitations and risks: what you cannot verify from greed alone

Greed-related mistakes are about behavior and decision quality, not about guaranteed outcomes. Even if someone corrects greed, results can still vary because markets change and execution differs. Also, historical relationships do not establish future results. A review can show whether decision-making followed a process, but it cannot guarantee a particular profit outcome.

Material limitations to remember:

Variable conditions: liquidity, volatility, and execution can change quickly.
Cost sensitivity: small changes in costs can change the net effect of a decision.
Cognitive uncertainty: people often misattribute outcomes (timing, luck, or skill).

Verification and next question to ask

A practical way to verify whether greed is the main driver is to focus on process evidence rather than predictions:

Did you change rules mid-trade after a feeling intensified?
Can you state your assumptions for sizing, exits, and costs before the trade?
After the trade, do your notes match the plan, or do they justify deviations?

If you want the next step, consider asking: What are the limitations of greed—what happens when it is present, and what would count as falsifying evidence that it was not the cause?