Taking Risks in Stride

“People who look for easy money invariable pay for the privilege of proving conclusively that it cannot be found on this earth” – – Jesse Livermore

Taking Risks in Stride

All traders must face risk. No trader is immune. Whether you’re a novice trader with a small account or a hedge fund manager trading millions, you must learn to take risks and live with the consequences. If we knew that profits were assured, we wouldn’t have trouble taking risks, but nothing is certain. Unfortunately, it is impossible to make profits without taking risks. The challenge is to readily accept the possibility that you may lose, but at the same time, take risks and occasional losses in stride.

Risking money can be difficult. When we fear the consequences of potential losses, we cower, paralyzed and defeated. We can alleviate some of the fear through risk control. By risking a small percentage of your trading capital on a single trade, and looking at the big picture, you will feel more at ease. If you make enough trades with sound methodology, you will profit overall. All you have to do is keep the risks small. Some traders suggest making the risk so insignificant that you may start thinking, “Why am I even bothering making this trade?”

Risks are hard to take for a variety of psychological reasons. Obviously we don’t like to lose, but it’s more than that. We dislike regret. Sometimes, our avoidance of regret is more powerful than our fear of loss. It’s one thing to make a losing trade, but it is quite another to feel that you’ve made a mistake, and continually berate yourself for making it. It’s useful to be aware of this dynamic. We dislike feelings of regret, and may avoid taking action because of it. How can we face possible loss and regret more easily? An old saying from romantic relationships may offer solace: “It is better to have loved and lost than to have never loved at all.” Similarly, if you yearn for wealth and financial security, it is better to have attempted trading and blown out a few times than to complacently wish you had tried and spent the rest of your life regretting that you never mustered enough courage to have taken a big risk and seen for yourself whether or not you could have realized your dreams. If you don’t take a chance, you won’t get hurt, but on the other hand, you’ll never know what could have been. In addition, if you don’t take risk after risk, by making trade after trade, you’ll never hone your trading skills, and you will never become a winning trader. So when you face risks and possible losses, don’t despair. Remember that it’s much worse to stand on the sidelines and wish you had taken action than gone after your dreams and feel satisfied in the knowledge that you tried your best.

Credit: www.Innerworth.com