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
Making money is a constant goal when trading the markets. There is always too much to do and never enough time to get it all done. The majority of traders share your fear of passing up possibilities. You are aware that it is challenging to withdraw money from the markets and that in order to maintain your position, you must continuously improve. Why do people in this line of business put in such long hours? Most people would claim it’s for financial gain. Is it not done for financial gain? Many traders assert that there are additional factors. Feeling that you have attained success in a field where few people last a lifetime is among the key causes.
A strong motivation might be a feeling of independence. Don, for instance, stated in an interview with Innerworth employees, “When I made the decision to trade full time, I did it for a few reasons. One was for independence and freedom… Although there were some financial benefits to trading, I wasn’t in it for the money. I took action for my freedom.
The independence that trading gives is taken for granted by many traders. There is a strong drive to keep up with the person next door in a competitive environment where most people determine their self-worth based on how they compare to others. One asks, “How well am I doing?” repeatedly out of habit, and that inquiry generally prompts, “How well’should’ I be doing?” The desire to succeed is difficult to ignore. The media constantly bombards us with images of success: “Buy a sporty, brand-new sports car and wow the neighbours. Put on the newest luxury clothing and watch as people stare as you pass.
The idea that you must have more than your friends and neighbours in order to be valuable as a person is implied in all of these statements. However, the pressure to succeed can make you feel confined. You will feel the strain and it may erode any freedom you may be experiencing if you are under pressure to earn enormous profits. Instead, aiming for moderate goals is considerably more beneficial. It supports your ability to handle the strains and stains of trade.
When you look at it that way, you can really get perspective because you understand that you don’t have to make everything in one day or one trade. ” When you organise your daily tasks, everything will look rational and you’ll feel liberated. So don’t put yourself through stress by attempting to accomplish seemingly unreachable ambitions. In the end, you’ll find that you can trade profitably and take advantage of the freedom trading gives if you think modestly and create realistic strategies for accomplishing them.