I do not know what it is lately but it seems like I see a person risk their life or limb crossing a street or just run into people almost everyday. The first thing I wonder is what is so important that they would risk being injured. Is there time that important? If so, why did they spend 3 hours watching Jersey Shore re-runs last night. Do they not know they can be hit by a car, truck, pedicab, etc.
The second is the person who walks out of a building perpendicular to the walking traffic without even a second look. Listen I am not a small man and when we collide it is not always pretty. No one wants to be known as the guy who cross checks the old lady either. There is some pretty serious mean mugging that goes on when you are picking up the bags intended for Goodwill of a lady sporting an “I voted for FDR” pin.
Obviously that last part was a joke but I see the same concepts when it comes to markets. Not looking where you are going. Here is what we know:
- Trading has risks: When you risk money there is a chance you can lose it. That does not mean all risks are created equal. To paraphrase what someone once said, the biggest risk is not understanding the risk. Once you understand the risk you can take steps to make sure the risk makes sense to you. Accepting the risk is hard, it means that you are privatizing the outcome.
- Privatizing the outcome: When you cross the street without looking you are betting that the driver isn’t going to be distracted, is alert, and has empathy. Your putting the outcome in another persons hands. Socializing the outcome. Eventually you lose that bet. Maybe not today or tomorrow or 5 years but eventually. In trading, the person who cares about your well being the most is you or it should be. You can’t control what the market does but you can control how you react to it and how much you are risking. (I understand there is no guarantee to be filled at your stop price.) Understanding when to cross when the risks makes the most sense is important.
- Habits form happen quickly with reward. There are no “I will just do this one time” actions in trading. It creates a habit. If you make money once you are really screwed. Chances are you will try it again. If it does not work the second time, chances are you are going to remember the first time more. You just lost a lesson and money. In the heat of the moment the brain has a way of making anything seem rational. It makes “sense” to try to cross the road into oncoming traffic if you are going to be late and get fired. But it never makes sense to cross the road into on coming traffic. Don’t be late to work when it comes to trading. Meaning continually put yourself in the a good position.
For the sake of your physical and psychological well being, look before you cross. When you stop thinking about what is around you and ignore risks you stop acting in your best interest.
I will leave you with a fews thoughts. Your inaction defines you when things are not aligning. Your action defines you when things are aligning. A person on crutches should never jaywalk.
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