The Risk of Trading: Mastering the Most Important Element in Financial Speculation

PERSONAL RISKS

There are many facets to the business of trading, and technology allows a choice of several options on how to participate in the markets. Work as an independent trader from home, work for a proprietary firm or hedge fund, or join forces with a partner or partners. You have available the latest in resources to help you and the information delivered to you faster than light. You have proven setups that detect edge and the ability to assess data to determine its predictability in a trading model and the ability to execute your plan in a controlled risk environment. There is only one other element to consider: yourself

The human element is a required but dangerous component in the success model of a trader. All the psychological challenges come into play when trading live. We are prone to making mistakes or allowing fear and other emotions to act as immobilizers separating us from our financial and personal goals. Working for a firm allows certain risks to be contained within an employee relationship framework. Big city commuting hassles, corporate limitations, and teamwork struggles can test your personal ability for success. Individual traders need to overcome their own demons that can prohibit any chance of victory. There are obvious exposures such as the inability to trade your plan through a series of losses or other types of pressures. Inability to detect edge, manage your business, or maintain focus all are risks that need to be identified and assessed. As you ...