Risk Management Psychology

Discussion in 'Risk Management' started by bitstream_ryder, Dec 9, 2018.

  1. Risk management is really essential to secure good trading returns for yourself. You must plan your trades carefully before actually executing them. Never let emotions dictate your trades. Be practical, study the markets and its related risks properly and then come to any decision. Put appropriate amount of capital in a single trade, try to be more diversified. Also, make use of stop loss to limit the risk to incur losses.
     
    #31     Jul 24, 2019
    murray t turtle likes this.
  2. wrbtrader

    wrbtrader

    That's the problem...some traders are doing everything you've stated and still have problems with the psychological management of risk management.

    They are looking for a way to enforce their risk management after doing all the above...enforce it too perfection as in 100% of the time because they know that when they only enforce it 99% of the time...its that 1% when they have no control over their psychology...distaster trading results.

    Worst, it then has a ripple effect when it should have just ended with that losing trade.

    I often wonder if these are the types of traders that should not be trading alone and should instead be trading with others (in person) in a group like environment to enforce or change how money impacts their trade decisions or risk management decisions.

    Heck, there are software programs that has risk management rules but any trader can easily change the settings.

    Simply, as retail traders...we do not have compliance office or compliance officer looking over our shoulder for every trade.

    Now imagine if the broker was involved in protecting our trading accounts too. You tell your broker your risk management rules...the broker then place the settings on your account.

    It's then all done for you and you're not allow to later change your risk management settings at the broker until there's a review/approval. No emotional breakdown, no personal family/friends drama, no job drama to impact sabatoge your trading. Your broker has your risk management rules in cement and applied to your trading account...

    Now go trade. :D :sneaky:

    wrbtrader
     
    #32     Jul 24, 2019
  3. A problem is that even experienced traders with profitable methods will experience multiple, consecutive losses and these are difficult to deal with emotionally. It can cause you to have doubts about yourself, your method, etc. The more losers in a row, the harder it is. And worse yet when the size of the losing trades is greater than the size of the winning trades.
     
    #33     Jul 28, 2019