Learn To Navigate Your Assets In Times Of Big Change
- One Risk Aspect Often Overlooked When Assessing Risk
There are many aspects to trading risk. The risk to capital exposure due to excessive position size relative to one’s stops is obvious. Co-relation of your positions in today’s highly co-related markets is another aspect that must be considered, and, of course, you know about the risk of not diversifying your assets.
But have you ever considered the risk you are assuming from your brokerage account? I am talking about your brokers’ ability to understand and manage the risk he is taking on from his clients’ positions. To be more precise, how your broker hedges the trades of his clients is a big consideration when you open a trading account. This is true even more so today, as volatility is sure to remain with us for a considerable time.
- We Are Entering the Chaos Phase of a Massive Long-term Cycle
During this phase, not only are unexpected events more likely, but our ability to make forecasts is reduced due to the erratic nature of this cycle. I know traders and investors alike do not like me to say this – it makes them feel uncomfortable, triggering the many hidden trading fears most traders have but suppress with all the mental power available to them.
Uncertainty engenders fear. Fear engenders greed. The two together ensure that the mind loses its ability to think calmly, a necessity for successful trading and investing. Instead the conditioned mind falls prey to all the imponderables, the fear unreasonable emotions tend to bring to the surface.
- Excessive Fear is as Dangerous to Your Trading Account as Misguided Confidence
In times of great uncertainty and upheaval, as we are experiencing at present, the need for greater security is higher than usual. The feeling fuels cognitive dissonance and if you recognize yourself in this category, allow the red alert to go off. You are not using sensible decision making parameters to ensure your future survival as a profitable trader.
I hardly need to remind you about the demise of some well known FX brokers who got into difficulty after the announcement by the Swiss to unpeg the Swiss franc from the Euro. Right now I am not going to tell you that you and your broker should have anticipated such an announcement coming; hindsight is of little assistance to get you out of a fix. However, what I can tell you is this:
If you have traded with Alpari, FXCM, or any other broker who did not manage their risk well, you have, hopefully, learned that having all your (trading) eggs in one basket is rather foolish.
- Providing On-line Trading Facilities for Traders is a Highly-Competitive Business
It has to be said – there are many brokers to choose from and many of those fly by the seats of their pants. Clearly, the recent scare which has made many FX traders scurry quickly for the safety heavens of other brokerage firms highlights this risk. Alas, unless you know what to look for when choosing your next broker, you could be falling into a trap. The risk you are taking on from your broker’s account is going to increase over the next years.
I do not know how long this chaos cycle will last. I do know though that it is going to bring everything to the surface that needs looking at in both our trading psychology and in physical aspects, such as brokerage accounts, proper asset diversification, and position sizing. The challenge we face today is how we can feel relaxed and comfortable in the face of upheaval and the knowledge that there is no quick end in sight to this cycle.
- Acknowledging What One is Dealing with is an Obvious First Step
The willingness to make changes, aligning with the present circumstances, rather than hoping that all is well, is the next step. Hope is never a strategy. Doing anything in your power to ensure that you can face the brewing storms with inner calm and confidence is a must.
Internal and external factors cannot be viewed in isolation. They all play into each other in a constant interface of awareness triggers, new opportunity, letting go of old ways, learning and repositioning from the new awareness gained.
- The Way I Looked at Risk 10 Years Ago is different Today
Granted, certain risk parameters remain the same. Alas, market conditions today are very different from conditions ten years ago and even more different from 20 years ago.
Whether you are a trader, investor or both, today you need to be more knowledgeable, more sophisticated, if you want to make money. This requires that you seek new knowledge pro-actively and educate yourself not only about market trends, but about the psychology at play that creates these trends, or lack of them.
When you understand this, you will understand why your broker account has more risk attached to it today then it used to have in the past. Having broker accounts for different trading, or investment strategies, and in different countries today is not just sensible; it is vital.
- Self –Examination Always Brings Clarity
It may take a while, but it works without fail. In times of change, we need to go within, observe the signals and then make our moves. Where you set your intention, answers will appear. Be warned though – the answers are often not readily apparent to the conditioned mind that anticipates things to unfold in certain ways.
Learning to navigate your mental and physical assets in times of big change makes the difference between being able to take advantage of opportunities or being frightened into reactive reactions.
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Related Reading …
Psychology: How To Stop Trading Hesitation
To learn more about Mercedes Oestermann van Essen and to sign up for her free course 7 Secrets to Trading Success and Happiness, please click here.
