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
When trading, mistakes are simple to make. You suddenly become disoriented, anxious, and make a trading mistake. Contrarily, when trading with an ideal attitude, the successful trader is concentrates on his or her present experience, the current market activity. Focus on action not prize. Rather than the reward is the finest rule a trader can adhere to. The satisfying rewards that may be gained from trading are what draw many people to it. Profits can frequently be used to purchase items that make one feel admirable or worthy in the eyes of family and friends. Similar to the lyrics of a well-known country song, one can ask their former detractors, “How do you like me now?” after becoming successful.
Many people are drawn to trade because of not Focus on action not prize, the rewards, prestige, and status.
All of these, can serve as powerful motivators, but ironically, if you place too much emphasis on winning, you won’t be able to trade profitably or regularly. Similar to the athlete who is the favourite to win a sport, one typically falters under pressure. High expectations make it difficult to concentrate solely on the tasks at hand. When your hopes are high, you’ve already made up your mind that you deserve the reward, so the mere possibility that you might forfeit it is terrible. It is possible to stop losing.
When one works under the notion that winning is the only option, one is typically easily sidetracked to the point of making a variety of blunders that result in losses rather than profits. You must develop the ability to pay complete attention to your current experience rather than the possible rewards.
Fritz Perls, a renowned psychotherapist, famously said that dread and anxiety arise when we dwell on the past and worry about what might occur in the future. We will be able to live in the now and enjoy our current experience if we can keep our attention on the here and now. We lose concentration on what we’re doing the moment we start worrying about what might happen in the future. We become disorganised, and when a deal is at stake, being disorganised can be disastrous.
Firstly, We will discuss Thinking about the large reward at the end, is the most frequent cause of concentration problems. You’ll lose focus if you start to think, “I can’t wait to make a profit and bask in the glory of success.”
You might even begin to believe that you must succeed in this trade. In the end, that kind of thinking is useless. It’s highly likely that you’ll begin to stress and make a trading mistake. Focus on action not prize, Such as, The more you can concentrate on the mental difficulty of trading as you place a transaction. The more probable it is that you will carry out your trading strategy with ease and trade regularly and profitably.
Nevertheless, it might be entertaining to occasionally consider winning the big prize, just not too frequently or during trading hours. Thinking on the possible long-term gains trading may offer, the big picture, may be stimulating during off-hours.
However, there is a distinction to be make between thinking that you “would like” to win the prize and feeling that you “must” get it. Even if the concept could come to mind when trading. It’s important not to let it consume you. It’s critical to recognise that, if prospective rewards are your major driving force, winning potential rewards may be your main driving force behind trading.
If you genuinely believe this and make an effort to suppress it, it will eventually seep through and have an impact on you—typically negatively. However, if you carefully consider this presumption and firmly persuade yourself that it isn’t a solid cause to pursue trading, you’ll neutralise the assumption.
Prize-driven traders typically don’t stay in the market for very long. The passion of the enterprise must ultimately come before trading. No matter if you win or lose, trading has its own rewards. In the end, If you can keep your attention on the actual trading process, you will feel more satisfied as a trader, trade more naturally, and trade more profitably.