“In extreme sports as in Trading, seeking those rare huge opportunities can also involve taking significant risk…”

Before setting foot in the Trading arena, an individual should ideally already have some understanding of their personality traits (i.e. know something about their own strengths and weaknesses).

The personality trait of extroversion tends to be associated with risk-seeking. To some degree, the trait of openness to experience also leans toward having an appetite for risk. Think of a skier who goes after the largest mountains and steepest slopes. That person is at the far right end of the spectrum as they seek to capture the greatest opportunities. Of course, in extreme sports as in trading, seeking those rare huge opportunities can also involve taking a significant risk.

The personality trait of conscientiousness is associated with risk prudence. For example, a highly conscientious driver will not exceed the speed limit or will only ski the safest slopes. That person will generally have little desire for extreme sports, minimising the risk of injury.

As with Trading, risk prudence is paramount. We can’t win the game unless we stay in the game. The initial goal at companies I used to work for, was not to become a hugely profitable Trader. It was to become a consistently profitable Trader. Two very different ideas. In skiing terms, the consistently profitable Trader is one who can master small hills, then somewhat larger hills, then small mountains, etc. It is this repetition of success and the consistency of successful experience, that builds confidence and inner security.

As a Trader, one of the biggest problems with taking full profit is you no longer have a position. This may cause you to jump into the markets again but perhaps this time with a poor entry. This fear of missing out (aka FOMO) may lead to overtrading and simply over risking.

Imagine if you were simply risk-seeking and began your trading career by placing large bets. Inevitably you would also encounter large losses and that would shatter your development of confidence and inner security. It’s important to recognise in trading, the risk is relative to the size of your trading account. If, for example, I limit my daily losses to £1k, that may not seem like big risk-taking, but it would be if I was only trading with a £10k pot!

Therefore, the journey toward becoming a highly profitable Trader is first becoming a consistently profitable Trader. It is consistency of process, mindset, and selection of opportunity that provides us with the emotional capital to go after larger rewards. You will often read or hear the saying ‘Trust the process’. I can not emphasise this enough!

On the flip side, don’t get too comfortable with being consistently profitable as this could prevent you from going after those larger rewards. Much like an entrepreneur. If they never take the larger risks of scaling up and expanding, they may well be a profitable local businessperson – and that might be fine for them – but they will never grow the kind of business they could eventually take public.

Striking a balance is key in becoming that consistent Trader. Too much conscientiousness may prevent us from taking greater risks associated with larger rewards. Once in a while, markets present us with those high probability opportunities. If we choose to stand aside on those key occasions, all we are doing is ensuring we never reap the rewards. I have always said to my Traders this is just as bad as losing.
So trading is very much a blend of general risk prudence with a healthy dose of selective risk-seeking where greatness is achieved by learning how to stay in the game. To do this, you must be flexible to adapt, win more than you lose and of course, capitalise on those occasional higher probability opportunities.

Note

The mindset of consistent winning is what provides the resilience to win big!

This is why I place such high significance on trading psychology. It helps provide access to intuition and implicit knowing. Often, it’s that intuitive knowing that alerts us to the bigger prize. So consistent trading alone is not enough. We need to understand how to cultivate consistent openness of our mind.

When I place a trade, I look for the best possible entry referred to as a sniper entry. Much like a military sniper who lies patiently, taking little to no risk. I also tend to spend most of my time sitting on my hands. Then, once in a while, a high probability opportunity sets up. Similar to when a high-value target appears for the sniper, making it worth taking the shot, knowing this may compromise his position and alert the enemy.

The sniper’s mindset while in the weeds is one of calm, focus and patience, but also extreme openness to – and readiness for – the high-value opportunity. This exact same mindset is required when trading.

Summary
Much of trading psychology equals a simple formula of mixing consistency of trading profitably with having the discipline to sit on your hands and wait for the chance to aggressively take risk associated with high probability setups. Once mastered, it becomes second nature for your intuitive knowing to alert you to the greatest rewards.