Preventing yourself from taking bad risks.

There is hardly a day that goes by that I do not see someone sprint out into traffic to save 30 seconds.   They risk being hit to save that time.  What are they thinking?  What lead them to think the risk was worth it?  I can not blame for the risk as much as for what they did leading up to that decision.

Fortunately I have never seen anyone be hurt, save one time.  I was probably 6 or 7.  A classmate had gotten off the bus.  It was a windy day and his hat had blown off.  Our bus driver at the time was well into his 50’s (everyone seems older when you are younger so I am not sure his actual age).  We start to drive off and it almost feels like a speed bump, followed by a horrific scream.  He had gone under the bus to get his hat.

The bus driver stopped.  He got off the bus to see what had happened.  The bus driver was in a state of panic.  He did not know what to do.  Although it was not really his fault he was still responsible for the safety of the children.  I do not remember much of what happened next but I do remember him basically trying to “rub dirt” on it.  He tried to get the kid to walk, it was like the scene from Bambi.  The kid was in a lot of pain and could not stand let alone walk.

How it relates to trading.

Bad risks do not just happen.  There is always something that leads to you believing that it is a good risk.  It could be that you have not prepared properly, that you have gotten away with that behavior previously, or there is something else going on with you that is more important than trading.

Once again, I think it is nearly impossible to not take a bad risk under those circumstances.  The fault is not in taking the bad risk but being in that situation.  If you have not prepared properly, wait.  If you have taken these risks in the past than you should have been evaluating why you were successful.  Concentrate on trades that are repeatable.  Your life tends to show up in your trading, if something is more important than take care of it.  Trading will be there later.

Once a bad risk has been realized, this is the first time you have a chance to make it better.  It was not the bus drivers fault for running over the kid but he made it worse by trying to gloss it over. Taking a bad risk can create a chain of bad choices.  Bad risks become worse with great frequency.  There is always another trade unless you do not have any capital.  Give yourself opportunities to learn and correct the bad risk.

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  • So true… not using proper stop loss + daily loss limits are the reason 95% fail…

One Response to Preventing yourself from taking bad risks.

  1. boomchef says:

    So true… not using proper stop loss + daily loss limits are the reason 95% fail…

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