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3 Trading Myths

Risk/reward is set in concrete. Nothing in trading, with the exception of the process, is set in stone. I have seen that stone sink many peoples trading careers. Risk/reward is as much of a filtering process as it is risk management. We look at market in terms of volatility, it keeps us out of slow times but it can dry up quickly. If it does we get out before the “reward”. If we see it expanding and everything lines up we will get out after the “reward”. We are always adjusting to the situation.

Every market move is a reason to trade. There are so many opportunities that there is no reason to create one. Once again, this is where the selection process comes in play. Staying on the sidelines is a trade. Being able to separate what happened from how you felt is important and makes it easier. Missing a move is part of being a trader, you can get over it now or later.

Traders take big risks. Bad traders take big risks. The difference between a retail and a professional is the professional trades bigger taking the same risk as the retail trader. That is in part because a professional sees more of the market and is flexible. They understand what they are comfortable risking and never get beyond that point with very limited exceptions. You cannot run away from the risk, it always reverts to the mean. But what you did before and when it does revert is the difference between profitable and unprofitable traders.