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
Flexible and Open to Possibilities
Successful traders are adaptable. They approach a transaction from various perspectives and aren’t hesitant to consider all of the options. They are aware that they can be mistaken, but it doesn’t concern them. Yes, they frequently anticipate being mistaken. Being adaptable is essential when weighing your options. You might experience losses if you tenaciously stick to one line of action. Be as adaptable as you can to increase your revenues.
When creating a trading strategy, fear might occasionally come into play. The strict trader may be hiding a fear that his or her strategy has little chance of success. The scared and inflexible trader concentrates solely on one possibility rather than carefully weighing all potential bad conditions, and does not come up with a backup plan of attack in case an unwelcome or unplanned incident throws off his or her trading strategy.
For instance, a stock may be expected to rise during the coming week, but one may secretly have doubts about whether the increase will be successful. Fear may cause the inflexible trader to avoid taking into account and accounting for any negative occurrences, such as earnings announcements, a potential increase in interest rates, or a rapid shift in market sentiment. The flexible trader, on the other hand, is unafraid to consider each of these options and decide which are more likely. The adaptable trader can adapt his or her ideas as needed and bounce back from a potential setback by remaining open to all options.
The best remedy for rigidity is to lessen fear since people are at their most rigid when they are terrified. One can think freely and flexibly to the extent that they can trade in a relaxed emotional state. Risk management can help to lessen fear. You’ll feel at ease and at ease if you know that you can withstand the worst-case scenario. Similar to this, if you trade with money you can afford to lose, you won’t have as much to worry and will be better able to consider all of the potential alternative elements that could affect your trading strategy. You might become less fearful and more open to considering all the options by developing a relaxed mindset. And the more adaptable you are, the more successful your trading will be.