{"id":94314,"date":"2016-08-20T19:53:05","date_gmt":"2016-08-20T23:53:05","guid":{"rendered":"http:\/\/countingpips.com\/?p=94314"},"modified":"2016-08-14T19:53:26","modified_gmt":"2016-08-14T23:53:26","slug":"how-your-perception-of-risk-can-sabotage-your-trading","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2016\/08\/how-your-perception-of-risk-can-sabotage-your-trading\/","title":{"rendered":"How your perception of risk can sabotage your trading"},"content":{"rendered":"<div id=\"inves-1736357717\" class=\"inves-below-title-posts inves-entity-placement\"><div id =\"posts_date_custom\"><div align=\"left\">August 20, 2016<\/div><hr style=\"border: none; border-bottom: 3px solid black;\">\r\n<\/div><\/div><p><b>By Admiral Markets<\/b><\/p>\n<p><img decoding=\"async\" src=\"https:\/\/lh4.googleusercontent.com\/bjYdHdm4SuAqziTWGFVj9mDTausSy5G3h8Wxg75OXU4CvBRYC1uu54i3eVJ40zdCy91jy4S7p-xK4dmWF9NT1jlvMJKOTI1kSkn3h7owEMSZVtTXFJp6ASh0EfcL0zFHph5Xkejs\" alt=\"risk tolerance.png\" \/><\/p>\n<p>Dear Traders,<\/p>\n<p>Most market players recognise the importance of risk management.<\/p>\n<p>However, this doesn&#8217;t prevent us from failing to correctly implement a trading risk plan.<\/p>\n<p>Did you ever wonder why controlling the risk in trading can be so challenging?<\/p>\n<p>This article will teach you how to defend yourself against riskless behaviour and<br \/>\n<a href=\"http:\/\/www.admiralmarkets.com\/education\/articles\/trading-psychology\/forex-trading-psychology\"><u>fearful<\/u><\/a> trading.<\/p><div id=\"inves-3236219092\" class=\"inves-in-content inves-entity-placement\"><hr style=\"border: 1px solid #ddd;\">\r\n<div id=\"inpost_ads_header\">\r\n<p style=\"font-size:10px; float:left; color:#666;\">Free Reports:<\/p><\/div>\r\n<div id=\"inpost_ads\"> \r\n<p style=\"font-size:15px; float:left;\"><a href=\"https:\/\/goo.gl\/1ApBOV\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/investmacro.com\/wp-content\/uploads\/2018\/06\/graph_techs_PD.png\" align=\"left\" width=\"80\"  height=\"55\"\/><\/a>\r\n\t     <a href=\"https:\/\/goo.gl\/1ApBOV\"><b><u>Get Our Free Metatrader 4 Indicators<\/u><\/b><\/a> - Put Our Free MetaTrader 4 Custom Indicators on your charts when you join our Weekly Newsletter<\/p><br><br>\r\n<br>\r\n<br>\r\n<p style=\"font-size:15px; float:left;\"><a href=\"https:\/\/goo.gl\/f3RrHX\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/investmacro.com\/wp-content\/uploads\/2019\/01\/cot_pie_80.png\" align=\"left\" width=\"80\"  height=\"55\"\/><\/a>\r\n\t    <a href=\"https:\/\/goo.gl\/f3RrHX\"><b><u>Get our Weekly Commitment of Traders Reports<\/u><\/b><\/a> - See where the biggest traders (Hedge Funds and Commercial Hedgers) are positioned in the futures markets on a weekly basis.<\/p><br><br>\r\n<\/div>\r\n<hr style=\"border: 1px solid #ddd;\">\r\n<br><\/div>\n<p>Moreover, I will show you how your trading behaviour makes you vulnerable.<\/p>\n<p><a href=\"http:\/\/www.admiralmarkets.com\/start-trading\/forex-demo\" target=\"_blank\"><img decoding=\"async\" src=\"https:\/\/fxmedia.s3.amazonaws.com\/articles\/Demo_Account-New2-4.jpg\" alt=\"Risk free demo account\" \/><\/a><\/p>\n<h2>Trader&#8217;s risk perception fluctuates<\/h2>\n<p>The reality is that people behave differently, depending on whether they experience loss or profit:<\/p>\n<p>&#8230;a trader who keeps losing will risk more\u2026<\/p>\n<p>&#8230;and a trader who keeps winning will risk less.<\/p>\n<p>Our emotional reaction to winning and losing decides whether we go for a more conservative or aggressive approach in trading.<\/p>\n<h2>The problem with fluctuating risk perception<\/h2>\n<p>The biggest problem is that your good intentions regarding trading<br \/>\n<a href=\"http:\/\/www.admiralmarkets.com\/education\/articles\/forex-basics\/forex-risk-management\"><u>risk management<\/u><\/a> can quickly become obsolete.<\/p>\n<p>Even if traders know how important risk management plan is\u2026<\/p>\n<p>&#8230;the dynamics change once real trading kicks off.<\/p>\n<p>A few losing trades may make you think further risk is acceptable &#8211; and winning trades may cause you to act overly cautious.<\/p>\n<p>To learn more about proper risk management plans, check out our video below.<\/p>\n<p><iframe loading=\"lazy\" src=\"https:\/\/www.youtube.com\/embed\/uaPgTZJUzuY\" width=\"640\" height=\"360\" frameborder=\"0\" allowfullscreen=\"allowfullscreen\"><\/iframe><\/p>\n<h2>Your trading risk profile<\/h2>\n<p>The reaction to risks are not the same for all traders because their risk profiles vary.<\/p>\n<p>In fact, there is a wide range of risk attitudes:<\/p>\n<p>&#8230;some traders are born risk takers&#8230;<\/p>\n<p>&#8230;while other traders are very conservative&#8230;<\/p>\n<p>Your risk attitude affects<br \/>\n<em>how<\/em> and <em>when<\/em> you react during periods of losses and profits.<\/p>\n<p>Traders with higher trading risk tolerance tend to risk more when losing &#8211; but not necessarily lose risk appetite when making profits.<\/p>\n<p>At the same time, traders with lower trading risk tolerance tend to lose risk appetite when making profits &#8211; but not necessarily risk more when losing.<\/p>\n<p>Remember that all traders encounter both wins and losses \u2013 there is no possible way to avoid that.<\/p>\n<h2>How to battle your risk weakness<\/h2>\n<p>The first thing you need to do is adopt the right trading risk attitude.<\/p>\n<p>Be honest with yourself and analyse what type of risk attitude you have.<\/p>\n<p>See the table below to check when you are vulnerable to being too cautious or too risky.<\/p>\n<p><img decoding=\"async\" src=\"https:\/\/lh4.googleusercontent.com\/5-5Q-PA59CnhhhQKheJw1SozleS5ithQUe5Qnl5nwa38SeUNxEQq_lXsEUTHzbLX40ZyHdZVMoQpPVMKUxF4o16aw4S2I-ALsV_dETuxtoe78Ypw47n4VSaJCXTNzIUIdtFHWCfe\" alt=\"Risk balance.png\" \/><\/p>\n<p>Once you know your risk attitude, you can start improving your overall trading risk implementation.<\/p>\n<p>Let me give you two examples:<\/p>\n<ol>\n<li>if you are a risk taker, you need someone else to manage your risk for you<\/li>\n<li>if you are too cautious, walking away from the computer could help remove the temptation to take profits too soon once your take profit is hit.<\/li>\n<\/ol>\n<p>Ultimately, the important lesson is that\u2026<\/p>\n<p>&#8230;understanding when and why we make mistakes in trading risk management comes first&#8230;<\/p>\n<p>&#8230;and after that, we need to make a tailored analysis and actually work on improving it.<\/p>\n<p>Traders are human beings &#8211; and as such, they are vulnerable to the bias of viewing risk in different perspectives.<\/p>\n<p>Hopefully, this article helped you increase your awareness &#8211; and start making steps towards improving your trading.<\/p>\n<p>Cheers and safe trading,<\/p>\n<p>Chris<\/p>\n<p><a href=\"http:\/\/www.admiralmarkets.com\/start-trading\" target=\"_blank\"><img decoding=\"async\" src=\"https:\/\/fxmedia.s3.amazonaws.com\/articles\/Live_Account-AMGeneric-6.jpg\" alt=\"trade forex and cfd\" \/><\/a><br \/>\n<b>Article by Admiral Markets<\/b><\/p>\n<p>Source: <a href=\"http:\/\/www.admiralmarkets.com\/analytics\/traders-blog\/how-your-perception-of-risk-can-sabotage-your-trading\" target=\"_blank\">How your perception of risk can sabotage your trading<\/a><\/p>\n<hr style=\"border: 1px dotted #eee;\" \/>\n<p><a href=\"http:\/\/www.admiralmarkets.com\/\" target=\"_blank\"><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/countingpips.com\/articles-analysis\/wp-content\/uploads\/2016\/03\/AdmiralMarkets-sig-1.png\" width=\"141\" height=\"87\" align=\"left\" \/><\/a><\/p>\n<p style=\"text-align: justify;\">Admiral Markets is a leading online provider, offering trading with Forex and CFDs on stocks, indices, precious metals and energy.<\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>By Admiral Markets Dear Traders, Most market players recognise the importance of risk management. However, this doesn&#8217;t prevent us from failing to correctly implement a trading risk plan. Did you ever wonder why controlling the risk in trading can be so challenging? This article will teach you how to defend yourself against riskless behaviour and [&hellip;]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-94314","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/94314","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=94314"}],"version-history":[{"count":2,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/94314\/revisions"}],"predecessor-version":[{"id":94340,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/94314\/revisions\/94340"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=94314"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=94314"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=94314"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}