28th Oct 2009
Psychology of Risk in Commodity Trading & Forex Trading
The psychology of risk in commodity trading is not that often of an issue discussed. I want to share an interview with my colleague Martin Bedick. Martin Bedick on the Psychology of Risk in Trading <img src=”http://myinvestorsplace.com/wp-content/uploads/2009/10/bedick.jpg” alt=”bedick” title=”bedick” width=”150″ height=”165″ class=”aligncenter size-full wp-image-886″ /> AJ: Martin, one of your main interests has been the psychology involved in commodity trading. What is it about this areas that interest you? MB: You are not going to believe this, but I actually thought trading was going to be an easy way to make money. It was only after a poor period of trading, I realized I had a problem. Since I wasn’t making any progress, I decided to re-think my approach to trading. In the original Market Wizards book, there was an interview with Van Tharpe. He was a psychologist that worked with traders, and at that time was working with Ed Sekoyta, one of the greatest traders in the last 30 yrs. After reading this interview, I arranged to attend one of their weekend commodity workshops. AJ: What did you learn at this workshop? MB: I learned how important one’s mindset is to trading successfully. AJ: Could you elaborate for us please? MB: Sure, as you know, trading is not easy and all traders are going to be presented with challenges on a constant basis. One of my all time favorite quotes comes from Mark Douglas’ book The Disciplined Trader. He states, “Most people like to think of themselves as risk takers, but what they really want is a guaranteed outcome with a little bit of suspense.” AJ: Are you saying they are not aware of the risk? MB: No, I am saying that they have not accepted the risk. Truly accepting the risk in trading, means you are no longer afraid of what may happen. The only thing that is certain in trading is nothing is certain! Once you understand that anything can happen, you will always act in your best interest and protect yourself. The successful trader is not afraid. Losing traders are always fearful. AJ: What are they so fearful of? MB: Most are fearful of losing money. However, some are afraid of their analysis being wrong, and others fear either missing a big move or leaving money on the table. AJ: So conquering your fears and accepting risk are similar in trading? MB: Yes, most traders spend vast amounts of time searching for a method to eliminate the risk. We all know this is impossible. Instead, one needs to change their mindset so that they truly learn to accept the risk. This may be the risk of losing money, the risk of being wrong which can lead to criticism from colleagues or clients, or the risk of missing moves by either entering late or exiting early which could lead to a different type of angst all together. Only then, when one can truly accept all the risks involved in trading, will you become a better trader. AJ: Thank you Martin, for that glimpse into the psychology of commodity trading today. I believe our readers will find your views both interesting and valuable.
Andrew Abraham
A.Abraham@AngusJackson.com
www.AJpartnersinc.com
www.myinvestorsplace.com
Futures trading involves risk. People can and do lose money
My name in Andrew Abraham. I am a commodity trading advisor – co manager of a commodity pool who adheres to the philosophy of trend following. Article Source:http://www.articlesbase.com/day-trading-articles/psychology-of-risk-in-commodity-trading-forex-trading-1389970.html
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