Of the broad categories of risks a trader faces:
Market Risk - volatility
Liqidity Risk - volume / impact cost
Operational Risk - systems / connectivity
Idiosyncratic Risk - Random Behaviour of trader
The most dangerous is the Idiosyncratic Risk. 1/n
Market Risk - volatility
Liqidity Risk - volume / impact cost
Operational Risk - systems / connectivity
Idiosyncratic Risk - Random Behaviour of trader
The most dangerous is the Idiosyncratic Risk. 1/n
You are your worst enemy! Since you dont even cognize that you do act randomly with your emotions, you become enemy number one. All other enemies are identified but the enemy within is never taken seriously! 2/n
This very large component of Idiosyncratic Risk from random behaviour of trader can come by way of rejecting good trade triggers on a string of losses & accepting bad trade triggers on a string of gains, apart from fear & ego driven non adherence to stops! 3/n
How does one protect one's trading book from enemy number ONE?
1. Observe yourself as a 3rd person removing I, Me & Mine.
2. Meditate regularly to imagine you are only the fiduciary & the capital belongs to family & society.
3. Never modify the trade logic / theses.
4/n
1. Observe yourself as a 3rd person removing I, Me & Mine.
2. Meditate regularly to imagine you are only the fiduciary & the capital belongs to family & society.
3. Never modify the trade logic / theses.
4/n
The problem is never lack of intellect. The problem is ALWAYS that one has more intellect than REQUIRED by the business of Trading.
Imagination & Creativity are worst enemies during market hours. They prevent you from taking a stop loss.
5/n
Imagination & Creativity are worst enemies during market hours. They prevent you from taking a stop loss.
5/n
It is therfore important for every trader to have a good work life balance and pick up a few hobbies or activities to pursue beyond market hours & weekends wherein the urge to be creative & imaginative are spent out sufficiently.
6/6
6/6
