Risk: To expose (someone or something valued) to danger, harm, or loss.
The other day while reading through the trade reviews I came across a post of one of our team members who pointed out how his emotions had changed once he raised his risk. He realized his focus went from being process oriented to outcome oriented as soon as more money was on the line. The ability to identify an issue such as this is a strength which we should all strive to accomplish. I’m assuming he’s not alone in the way he felt and anyone who has raised their risk at some point, or another knew exactly how he felt in that moment.
In my short career of trading, I’ve wondered how I would approach raising my risk. I’ve always been somewhat of a penny pincher and losing money never sat well with me. But Jared once pointed out in an email that losing was part of the business so I would need to get over that immediately. I guess you could say I’m trying.
I pull a lot of analogies from sports because when you play softball for 15 plus years starting from T-Ball through college you tend to learn a lot about life between the lines. I compare raising risk to playing games, specifically the everyday game vs. the Championship game. Both games are identical, same rules, same distance between base paths, same number of innings but the only difference is the prize at the end, the coveted trophy, or the mundane great game high fives as you walk through a single file line.
The question is, how do you stay focused when there’s more on the line? The truth is, you must focus on what you can control and that is your process because the outcome is out of your hands. Before I even set foot on the playing field on game day, I had prepared myself mentally and physically in practice and off the field. Then when I arrived at the game the only things, I controlled at that point were the pace of the game, my pitch calls, and my attitude. I had full and complete control of the process before and during the game but the only thing I couldn’t control was the outcome. I couldn’t control the bad calls from the umpires or prevent the errors in the field that would possibly be occurring that day. Once I threw the first pitch of the game my control was relinquished at that point. I had done everything I could to be successful that day.
The same goes for trading. Your process starts before your first trade in the mornings. You put in the time and effort to fine tune your process and build a foundation that you can trust regardless of what’s on the line. But when you enter your trade, the outcome is out of your hands. We can’t control the markets, what’s going to happen will happen. If you have built a process that you trust, then trading with higher risk shouldn’t change your approach. If it does, maybe you should ask yourself why? Why do you panic when more is on the line? Could it be you weren’t ready to raise your risk?
I think a lot of traders tend to rush building their foundation, or perfecting their process, and once they meet the criteria to raise their risk, they do. Just because your plan allows it doesn’t necessarily mean you should or that you’re ready to raise your risk. The truth of the matter is the mental game of trading is more important than the ability to physically enter and exit trades. In softball my mental game on the rubber was significantly more important than my physical game. Sure, I had to be physically fit but if I couldn’t keep my focus after someone hit a homerun off me, after I pegged a batter, or I walked in the tying run I would have never succeeded when my back was against the wall. I would have never succeeded when my risk was raised.
If we can’t control ourselves because our processes are weak, and we don’t hold ourselves accountable we will never be able to raise our risk successfully. I think it’s important as traders that we take a step further and ask ourselves the following questions before raising our risk.
Does my track record prove I can be successful?
Do I make sound decisions and stay out of bad trades when I see them forming?
Do I control my emotions while in a trade and follow my plan?
Am I able to lose a trade and not revenge trade?
Do I deserve to raise my risk?
I’m not saying we should expect perfection from ourselves before we have the right to raise our risk, but we should be realistic with ourselves when the time comes to raising our risk.
So, when the day comes or if it’s here already and you believe you’ve earned the right to raise your risk, then focus on what you can control, process over outcome, and remember, the playing field never changes.
For more great articles like this consider joining my coaching group “Coaching With Cliff” here are Live Trader’s. More information on the group can be found at the link below.
https://livetraders.com/groups/detail/2b144965-1248-4117-a8e0-be3f70c5725d
