Who this is for — Traders who change an objective, exposure or trading frequency because realised or expected profit makes the limits set before the trade feel insufficient.
In Cyclepedia, greed is a descriptive label for a process problem: the prospect of additional profit displaces the criteria fixed in the trading plan. It is not a clinical diagnosis, cannot be inferred from one trade and does not show that price is about to reverse.
It may appear as moving a target without new evidence, raising risk per trade after a win, or multiplying entries outside the plan. The same change may be rational when it was pre-planned or is supported by new information and recalculated risk: the decision process matters more than the emotional label.
From desire to a testable decision
Process warnings, not market signals
| Observation | Control question |
|---|---|
| The target moves farther away as price approaches | What new information changes expected value or invalidation? |
| Risk rises after a positive run | Was the new exposure pre-planned and is it still within budget? |
| Trade count rises without new setups |
Thaler and Johnson's experiments show that, in some settings and under a particular framing of prior gains, willingness to take risk can increase—the house-money effect. This does not mean every trader responds that way. Barber and Odean associate high trading activity with poorer net results in their sample of retail accounts; the finding does not make every additional trade wrong or establish which emotion caused it.
Operating procedure
- Before entry, record the target, invalidation, risk and any management rules.
- If you want to change the plan, record the new information and recalculate potential loss, costs and remaining exposure.
- Compare the change with leaving the plan untouched; open profit or a previous win is not evidence on its own.
- Record the decision and outcome in the trading journal, separating process quality from the result of one trade.
- If the change does not meet the previously defined criteria, apply the planned rule; there is no need to guess the market top.
Limit — No checklist removes uncertainty. A plan-consistent exit may be followed by further gains, and a well-documented change can still result in a loss.
Sources
- Thaler and Johnson, Gambling with the House Money and Trying to Break Even — Management Science — real-money experiments on how prior gains and losses affect risky choices.
- Barber and Odean, Trading Is Hazardous to Your Wealth — The Journal of Finance — evidence from retail accounts on turnover and performance after costs.
- CFTC, Forex Frauds — risk capital, per-trade planning and avoiding emotionally charged decisions.
- Investor.gov, risks of social-media-driven short-term trading — risk, impulsive decisions and the role of a financial plan.