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
Do you ever feel like your chances of making money on the trading day are slim? You simply sit there, frustrated, and gaze at your devices. In situations like these, having a positive outlook can give you new energy. When you approach trading with an upbeat perspective, you’ll be prepared to look for new opportunities to make a profit. Mark Douglas, a trading expert, claims that traders should work to narrow what he terms the “reality gap.” According to Douglas, “there is a vast disparity between what is conceivable from the trader’s personal perspective and what is achievable from the market’s standpoint, which is nearly anything.” What traders believe they can extract from the markets is constrained by their expectations. The possibilities, though, are numerous.
Successful traders keep going despite what seems like never-ending defeats. Rare individuals possess the ability to bounce back swiftly from a difficult fall and eagerly take on another possible obstacle. Dr. Martin Seligman has researched the benefits of having a positive outlook on life. He has researched a variety of occupational groups, including dealers on the trading floor and elite, successful sportsmen. Being optimistic is a key predictor of success. Pessimists struggle at work, perform worse academically, and lose more elections than optimists do.
The way people view events in their lives has an impact on their optimism. People that fail attempt to comprehend why they failed. People who are pessimistic think that they have a permanent personality flaw that causes them to fail. They believe that their failure is an indication of a persistent and stable weakness in their aptitudes. For instance, they become overly sensitive during a particularly difficult trading day. Others can trade on a day like this, but I’m so untalented that I’m stuck, they may reason. There is no hope. I’ll never be successful as a trader. But it’s crucial to keep your spirits up when you feel defeated.
Robert Koppel recommends establishing an optimistic mindset by repeating specific uplifting concepts in “The Mentally Tough Online Trader.” It helps to tell yourself, “I believe I will be a successful trader,” when you’re feeling depressed. I think my trading will produce amazing profits. Every day’s performance is, in my opinion, new. You can take on the markets and sort through available market opportunities until you identify a workable strategy to turn a profit by thinking these encouraging, upbeat thoughts.
If you want to be a good trader, you must adopt an upbeat mentality. It will take tenacity to persevere until you find a run of profitable trades since as a trader, you will come across far more losers than winners. It’s easy to feel discouraged and like your options are limited. A positive approach, though, can enable you to overcome the disparity between your low expectations and the abundance of market chances.