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
Following your Passion
People who are successful are passionate about what they do. They are more interested in the method involved in reaching the goal than the final result. It would be lovely to not worry about results, but not many of us have the privilege. I suppose it’s a little too optimistic. Unfortunately, the majority of us must work to support our families, thus the possibility of losing a lot of money when trading is constantly on our minds. Unless one is independently affluent, making money or losing it is always on our minds and influences our behaviour, whether we trade full-time or part-time. This worry drains mental resources. Every trade we make causes us a little amount of anxiety.
But if we could simply temporarily, even occasionally, forget about the money, we would be liberated and inventive. For its own reason, we would appreciate what we were doing. Even if it could be challenging, it is worthwhile to strive to develop such a viewpoint. You may trade in an ideal, peak performance mentality to a greater extent the more you can concentrate on the trading procedure.
Expert traders claim that they think of trading as a game or a competition. Like in any game, you falter under pressure when you concentrate on the result rather than the play. The same is true of trading. You’ll feel more satisfaction and trade more successfully if you can just concentrate on the delightful and fun parts of trading. Therefore, keep in mind what you find enjoyable about trading whenever you feel bored or frustrated when trading. For instance, some traders take pleasure in creating trading techniques.
They see creating a trading strategy as a difficult intellectual task. These traders view a trade’s outcome only as a measure of how effectively their strategy is performing. When things don’t go exactly like they expect, they don’t get upset or frustrated. Whether a deal is doing well or poorly has no bearing. In fact, many traders are content to close out their position and further analyse their strategy when a trade is performing poorly. They put a lot of effort into figuring out what is going wrong and how to adjust their plans to make them more successful. Not the prize, but the intellectual challenge is what counts.
Others who trade take pleasure in the thrill and excitement it provides. Some traders enjoy the rush of placing a transaction, notwithstanding the benefits of trading with an objective, unemotional perspective. They have an explorer’s temperament. They eagerly anticipate what will happen after a trade is completed. It excites them and provides them a buzz. They do enjoy this stimulating aspect of trading, but they are not necessarily pathological gamblers in the sense that they seek thrills merely to increase their adrenaline levels. They are motivated to work toward mastery because they are aware that the act of trading itself will soon be profitable.
Investing is entertaining and fun whether you are a long-term investor or a day trader. The more you can concentrate on the process and its underlying benefits, the more content you will feel over time. So, try to concentrate on the aspects of trading that you enjoy the most. Regardless of the outcome, you will find trading to be lucrative and pleasant.