CHAPTER 16
Managing Risk
Yes, risk taking is inherently failure-prone. Otherwise, it would be called sure-thing-taking.
—Jim McMahon
As you progress as a trader you will become involved in thinking and probably reading about trading psychology. Trading psychology is a broad term that encompasses the study of traders and their emotional issues about trading. Trading-psychology literature takes its cues from scientific study of psychology, common sense, and the experience of traders and trading gurus. If you are interested in trading psychology, it probably means that you are further along in your trading education.
If you are one of the traders with an interest in trading psychology, you have moved beyond looking for the perfect trading system. You now understand the important role emotions play in trading results. One thing that many traders fail to recognize is the intricate relationship between what you risk and the emotions you experience during trading. In fact, risk and trading psychology are two sides of the same coin.
YOUR RISK PROFILE
Every battle is won before it is ever fought.
—Sun-Tzu
Some would say your lot in life has been decided. The ending balance of your account is already known. If this were the case, would you like to know who knows this number? Why not ask this person now to find out if you should spend so much of your time trading? Who knows what your final balance will be? Who is this person who can tell you what the future holds? Who knows how much money ...
