Fear – Fear makes traders exit positions prematurely or avoid taking trades due to the threat of losses. In market stress, fear can override logic, causing panic selling. For example, a fearful trader might tighten the StopLoss or cancel orders, missing out on recovery. In algorithmic trading, fear manifests if humans override the bot (e.g. moving stop levels in panic). Fear “causes traders to close out positions prematurely or to refrain from taking on risk” and is a potent emotion driving irrational exits. Bots are immune to emotion by design, but if a system is set with very tight stops or prematurely triggered thresholds, it can mimic fear-driven behavior. Using hard-coded StopLoss and automated exit rules helps counteract fear by locking in losses or preventing emotional overrides.

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