Trade The Journey

Trade The Journey

We all face Risk!

Top of the Morning!

Hopefully, everyone is healthy and safe. Wealth can buy nearly anything in this world except for health. I entitled this post “Risk” to highlight its presence in nearly every aspect of our life.

We take a risk in pursuing our dreams, goals, and careers. Nearly everyone doubts or questions the direction of their life journey at some point. However, we must remain diligent and work anyway.

Two years ago, I began my journey toward Financial Independence. Surprisingly, I haven’t switched to another business, nor have I missed a day of financial education. I’ve been consistent, which isn’t easy with life’s constant surprises and challenges. It’s been quite a journey.

I can remember reading books above my level of understanding and wondering why the book was a best-seller. Months later, I’d wonder why the same book didn’t sell more copies.

With time comes clarity, and over time I can say with more confidence, “I know how to trade.”

I still have a ways to go before I’d label myself a professional trader and financially independent.


Risk

After you learn the set-ups and patterns, trading then becomes about risk management. The ultimate goal is to stay in the game. You can only trade if you have the money to trade.

The only other option is to borrow to trade, which I wouldn’t do.

My definition of Risk is the chance of loss or an unfortunate event. Every time we leave the house, we encounter Risk. We’ve often identified our Risk due to our daily routine experience, so we generally know what to expect.

Even if we haven’t quantified our Risk, we know the probabilities of an adverse event happening. Most of the risks the average person faces have a low chance of occurring. Our behavior is based on risk avoidance and control, which is why a routine feels so comfortable.

Trading is the opposite of feeling comfortable. Perhaps I should say the act of trading is inherently uncomfortable. When we trade, we lose a guaranteed outcome and must concede to an outcome layered in probabilities.

We have to accept the Risk, and the best traders I’ve seen think of Risk before they think of profit. Profit is truly out of our control and takes care of itself. No one knows how high or low a stock can go.

There is an art to taking profits, but this post is about Risk.

The best traders know that we can control our Risk. A well-disciplined and experienced trader knows that their stops, mental or physical are there for a reason. Because no one knows what can happen next, we have to be prepared for an outcome out of our control.

Based on our journal and record of trades, we should have a general idea of our trade set-ups and personal style probabilities. The larger number of trades placed, the more data we have to review and analyze. We can assess the psychological risks our trading style poses to us with our journal.

I highly recommend Micheal Toma’s book on Risk called “The Risk of Trading.”

The only way to honestly assess your risks is with historical data. This data has the power to enlighten you on your likely responses to market movements. Data also can show the likelihood of a price pattern completing profitably.

I’ve been keeping a journal for three months now. After completing this post, I will total my trades and enter each into an excel spreadsheet. This part of being a professional.

I realize the seriousness of trading.


This past week:

This past week, I can say that I was financially responsible. Removing energy drinks from diet and routine has helped to stabilize my energy levels. It has also helped to decrease my discretionary spending.

I have no reason to enter the gas station for snacks or drinks. Nor am I spending over forty dollars on energy drinks at Costco. I’m focused on continuing these cash preserving habits.

I’d like to give myself a “C+” for continued improvement and healthy eating.

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