Psychology and Risk Management
• What to expect
• Risks
• Position sizing
• illusion of control
• Accepting critisism
• Paralyzed by fear
• Loss is a feedback, not a failure
• The flexible trader
• Focusing on the positive
• Short straddle
• The dynamics of greed
• The herd mentality
• Notes
In the world of trading, failures are more common than not. Finding trustworthy trading techniques is difficult, and usually, a tempting strategy ends in failure. Losses and other setbacks can make you feel anxious and frustrated. But the successful trader is unfazed by these failures. Trading winners don’t run from difficulties; they embrace them.
It’s critical that you can handle irritation. A clear, practical strategy must be in place for dealing with setbacks in order to prevent psychological damage and chronic stress issues. Your body and mind have a certain amount of energy, so if you can’t manage your aggravation and worry well, you’ll soon run out of it. Your capacity to concentrate and think clearly will be lost. But you may increase your ability to handle frustration by following a few particular precautions that will prepare you for a flood of trading failures.
People with low levels of frustration tolerance frequently think they ought to have zero obstacles. However, failures are an inevitable part of life. Indeed, you should prepare for failure if you’re aiming to succeed in a difficult industry like trading. Challenges and failures can be seen as a part of life’s pleasure and stimulation rather than as dreaded occurrences. Instead of seeing a trading defeat as a frustrating obstacle, you should consider it as an opportunity to learn and advance your trading abilities. Simply altering your perspective on potentially upsetting circumstances can alter your tolerance for them. You’ll feel less irritated if you anticipate them and understand that they are natural occurrences rather than a catastrophe.
And rather than passively feeling paralysed by them, you’ll try to come up with innovative ideas for how you may use the setbacks as a fresh start that can advance your trading abilities. Consider failures as opportunities to expand your market knowledge and improve your trading techniques.
It is crucial to adopt specific preventative measures in addition to a general mindset modification in order to tolerate dissatisfaction. The most crucial stage is to strengthen physiological defences. When we are exhausted and worn out, it is challenging to deal with frustration. We can handle irritation better by obtaining enough rest, and especially sleep. Your body can develop a natural defence against frustration with the aid of regular exercise and healthy nutrition.
You’ll also try to think of creative methods to use the failures as a fresh start that could lead to greater trade abilities rather than letting them passively paralyse you. Use setbacks as a chance to gain new market knowledge and sharpen your trading skills.
In addition to a general mindset change, it is important to adopt other preventative measures to withstand frustration. The most important step is to build your physiological defences. It is difficult to handle frustration when we are worn out and fatigued. By getting enough sleep, especially at night, we can better control our frustration. With regular exercise and a nutritious diet, your body can naturally develop a defence against irritation.
You could wish to compile a list of profitable deals to refer to when you are particularly defeated in order to cope with them. Understanding that, even though outside factors may thwart your plans, you have the power to decide whether they will affect your mood is the key to coping with frustration. You may either prepare for setbacks, see them as challenges and learning opportunities that will help you advance your trading abilities, or you can choose to feel defeated, angry, and upset. You’ll be able to deal with setbacks more readily and use them as stepping stones to greater levels of trading success the more you can accept that they are an inevitable part of trading.