We all have heard about the importance of risk management and how crucial it is to our success.

However, nobody really talks about all the elements of the risk management. The most talked about risk management is market risk. Then credit risk. After that, you hear about counterparty and operational risks.

As a previous risk manager, I can tell you that all of these are important to your success. You need to look at your process and make sure that you have a great risk management system in place.

There is one element of risk management that is seldom talked about and often overlooked. This element can make or break your trading success.

Often, it is forgotten as part of the stress tests.

Have you guessed what it is?

If not, let me give you a hint. Depending on how you look at it, it can be consider part of counterparty or operational risk.

Some examples are as follows:

1. Do you have occasions when you know what to do but you don’t do it? Then you wonder what happened. You get angry and frustrated. You start losing money. If you don’t stop yourself, before you know it, you are in a deep hole.
2. Do you know of traders who have a system and know that their success is based on probabilities? However, they start picking and choosing which signal to pull the trigger on. Then they wonder why they are not making money consistently.
    
3. Have you ever put a trade on and immediately started doubting yourself? You move your stops, and you realize if you had just left it alone, you would be more profitable?

Have you figured it out yet?

If you have guessed that it is your mindset, you are correct.

All the above examples have one common thing – the human factor. Unless you have a completely automated system, you are the operator. Your results depend on you.

It does not matter what happens. It matters how you react to the event and where you put your focus on.

You can have the best systems in place. However, if you don’t develop your Mental Edge and are not in the zone, you are not going to execute your trades properly and thus you will lose a lot of money.

This element is so important that JP Morgan has a group called the ‘Behavioral Finance Team’ which deals with how mindset influences the execution of their trades.

Your action plan for designing your risk management system is:

1. Counterparty risk: Make sure your business plan matches who you are
2. Operational risk: Put yourself in a supportive environment
3. Counterparty and operational risks: Develop your Mental Edge

Risk management is vital. To ensure more successful execution of your trades and a consistent way of making money, make the above action plan part of your overall risk management system.

Here is to making trading success your habit™,

Tags: market psychology, mental edge, Nazy Massoud, Personal Risk, Psychology, Risk, Risk Management, trading emotions, trading success

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One of the things that I am hearing more and more these days is that traders are not making money consistently.

Do you know anyone with this challenge? Do you know them intimately?

So, what can you do to make money consistently?

1. Deal with your trading as a business

If you think of your trading as a hobby, then you produce the results of the hobby and making money becomes secondary.

For your trading to be successful, it is imperative to create a proven process to make it a success.

2. Have a written plan that matches who you are

This is a very important step. We want to have a proven plan that succeeds. However, if it does not match who you are, you are setting yourself up for failure. It will work for a while, but because it goes against who you are, after awhile you find reasons not to follow it.

3. Have a money management system in place

When you have a system in place, it enables you to manage your risk better thus allowing you to preserve and grow your capital on a more consistent basis.

4. Create your own daily routine

Everything we do is a routine. If you think about it, when you get up, you follow certain routines. However, most of us are not conscious of our routines. So, create one that serves you and sets you up to make money consistently.

5. Be patient

I know that some traders love the excitement of trading and once the excitement is gone, they get bored and start sabotaging themselves. Does this sound familiar?

If you are looking for excitement, find a hobby that can provide you the excitement.

This is one of the most important skills of your trading success.

6. Don’t focus on the money

By focusing on the money, you get hooked on the trade that you have placed in. Therefore, you are less likely to be in the zone and really noticing what is happening in the market.

You need to detach yourself from the result of your trade. This does not mean that you don’t care. Of course you do, and that is why you have placed your trade. It means that you are not married to your position. You are free to be in the zone and really notice what is happening versus what you hope and wish to happen.

7. Develop your Mental Edge

This is a crucial step. Stephen Covey has a 90-10 principle. He mentions that 10% of your life is determined by what happens to you. 90% of life is decided by how you react.

Events happen to us. What differentiates the super stars is how they react!!!

“Any fact facing us is not as important as our attitude toward it, for that determines our success or failure.”
~Norman Vincent Peale

Remember, this is a process. Any step in the right direction moves you closer to your goal.

“Continuous improvement is better than delayed perfection”.
~ Mark Twain

Here is to making trading success your habit™,

Tags: market psychology, mental edge, money management, Nazy Massoud, Personal Risk, Psychology, Risk, trading emotions, trading success

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Yes, spells, you heard me correctly. You may wonder in this day and age, why are we talking about spells?

What are spells? In today’s culture, it is called subliminal messages or going one step further, it is your own beliefs.

Spells are beliefs/thoughts/actions that we follow without really knowing why.

A simple example is when you go to supermarkets. They use scents to encourage us to shop for the things that we probably would’ve not bought otherwise.

Another example is media. On a daily basis, we are bombarded by negative messages. So, we tend to focus on what can go wrong and are constantly waiting for the other shoe to drop.

Read the rest of this entry »

Tags: emotional risk, market psychology, mental edge, money management, Nazy Massoud, Psychology, Risk, trading emotions, trading success

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These are uncertain and confusing times. Everywhere you look, any conversation you listen to, it is about the economy and its impact on our lives. We hear about deficit, raising taxes, unemployment and lack of liquidity. It is enough to make everyone enter a negative emotional spiral.

How can you deal with these uncertain times?

1. Manage Your Emotional Risk 

• Limit your input – Be conscious of how much time you spend talking / listening to others about the negative impact that these markets are having on our lives.It reminds me of a quote that I heard: “Worrying does not empty tomorrow of its troubles, it empties today of its strength.”

• Separate your results from who you are – Yes, I realize the majority of us define ourselves by what we do and how much money we make. This is the time to rethink that.

• Reduce your stress – This allows you to be more creative and enables you to plan rather than react.

It is crucial to manage your emotional risk, and yet it is challenging. What are some ways that you can manage it?

Napoleon Hill says: “If you don’t control what you think, you can’t control what you do. “

1. Manage Your Expectations

Be realistic with the goals that you are setting for yourself. When you have unrealistic expectations, you set yourself up for real pain…

Remember, tough times don’t last forever. To thrive in these situations, you need to be resilient, strong and flexible.Roger Crawford says: “Being challenged in life is inevitable, being defeated is optional.”

1. Recalibrate Your Skills and Strategies

This is the time to think about how you can reposition yourself to make it in these markets.Look at your strategies objectively and see if they still apply. Don’t be attached to how things were. These times are like nothing we have experienced in our lives.

If the old strategies don’t work, come up with new ones and see if you need to develop new skills so you can apply them to the new strategies.This is the time that you need to think and act differently.

Napoleon Hill says: “The majority of men meet with failure because of their lack of persistence in creating new plans to take the place of those which fail.”

1. Give Yourself an Emotional Stimulus Package

This is very important. It is about coming from a place of gratitude. Yes, I know when we are hearing all about doom and gloom, it is challenging to be grateful.

Ask yourself, how can I find more meaning in my life?

My challenge to you is to find at least 3 things that you are grateful for. It can be as simple as, you have your family, your health and people who care about you.

William Arthur Ward has a quote: “The pessimist borrows trouble; the optimist lends encouragement.”

To summarize, the 4 steps we can take to succeed in the current market conditions are:

1. Manage Your Emotional Risk
2. Manage Your Expectations
3. Recalibrate Your Skills and Strategies
4. Give Yourself an Emotional Stimulus Package

There is a quote by Yoda that says: “Train yourself to let go of everything you fear to lose. . . The fear of loss is a path to the Dark Side.”

Tags: emotional risk, market psychology, mental edge, Nazy Massoud, Psychology, Risk, trading emotions, trading success

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