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
Trading can occasionally be tedious. You have to continuously search for market chances, and once you do, you have to risk your money and a little bit of your ego, and you have to live with the results—good or bad. You’ll soon join the dejected minions who have left the trading profession if your heart isn’t in it. You must enjoy the trading process if you want to succeed as a trader over the long term. If that were the only method to trade, you must believe it’s so thrilling that you would do it for minimal wage. The prize is not the focus. It’s a calling and an honourable goal.
Who wouldn’t want to trade successfully? You could do anything you wanted if you had total financial independence. However, it’s important to translate the vague objective of being a successful trader into a precise, detailed strategy. Your trading goals should be exact, definite, and well-defined, according to Robert Koppel and Howard Abell, who make this argument in their book “The Inner Game of Trading.” You must also make an effort to finish your tasks in a reasonable amount of time. Your goals should be attainable and stated in a way that empowers you. Setting an objective that is simple to quantify is also crucial.
Koppel and Abell claim that there are various ways to specify trade goals. First, you might establish performance goals that are centred on how well you are performing in comparison to your own standards. You aim to improve your physical and mental trade skills when working toward a performance goal. Second, you can specify outcome objectives. Outcome goals aid in identifying your priorities. You can use them to create trading methods and strategies that suit your personality. Third, setting a motivational goal encourages you to put more effort into developing your trading abilities. You can keep up a high level of enthusiasm and confidence by setting motivational goals.
For instance, it’s crucial to develop emotional self-control. Many traders make emotional decisions instead of logical ones. They also struggle with accepting defeat. It’s important to get past setbacks without fuss rather than let them bother you. It’s crucial to create a trading strategy that complements your personality. All traders ought to keep their risk under control. These are but a few examples, but with each of them, it’s imperative to work diligently toward achieving specified objectives each day. You might simply try to set a performance objective on some days. You could put a trading technique you’re seeking to perfect into practise using a bar you personally deem suitable. On other days, you can aim to accomplish a certain goal and gauge your success.
Many traders commit the error of trading aimlessly every day without attempting to accomplish any particular objectives. It’s like trying to saw down a tree without ensuring sure your blade is sharp enough to cut wood, as Koppel and Abell put it. Goals orient and inspire. You are embarking on a journey without a map if your aims aren’t clear and explicit.