The Psychology of Risk: Mastering Market Uncertainty bridges the gap between investor psychology and quantitative risk management with a revolutionary risk management program that virtually any trader or investor can easily adapt to their goals and personalities.
Author’s Introductions:
What gives you the conviction to put more at risk and how you delineate the premise of the trade are two critical components to successful trading. To succeed at trading, you must probe the reasoning behind why you are trading the size you are trading.
In order to maximize your risk-taking ability you must be able to get bigger, and to do this you need to determine exactly what is getting in the way of your current risk taking.
There is something in a trader’s basic makeup that leads each one to receive and translate fundamental data differently and then to implement trades differently as well. Each trader needs to consider:
- What can I do to change my self-limiting habits and attitudes that are leading to repeated failures or insufficient success?
- If a habit or attitude or life principle can’t be changed, what new approaches to trading can I adopt that could transform my trading and empower me to realize my goals?
- What can I do to trade in a more risk-controlled way?
Failure in this business is behavioral and intellectual, and most traders need to keep learning more about the behavior of trading, the behavior of taking risk, the behavior necessary to be comfortable taking risk. When working with a trader, I always ask:
- What is the trader experiencing at the moment she is assessing the trade?
- What does she see?
- How does she see reality and take action in the face of uncertainty?
The Psychology of Risk has been written to explore these issues and many more. I seek to explain some of the most common behavioral components of trading from a psychological perspective. I do this by examining certain principles of successful trading and the reasons why various traders have difficulty in applying these principles, and I outline solutions for individuals with these various behavioral problems.
Contents:
– PART ONE : THE ESSENTIALS OF RISK TAKING
- Defining Risk
- Understanding the Approach
– PART TWO : THE PROBLEMS OF RISK
- Handling Your Emotions
- Learning to Let Go
– PART THREE : THE PERSONALITIES OF RISK
- Profiling Passive Traders
- Profiling the High-Risk Trader
- Recognizing the Master Trader
– PART FOUR : THE PRACTICE OF RISK TAKING
- Increasing Your Risk
- Handling Failure and Success
- Doing the Work
- Coping with Risk: Coaching, Teamwork, Systems
