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PART SEVEN - Defining and Managing Risk > CHAPTER 41 - Psychological Risk
CHAPTER 41
Psychological Risk
The single most important thing I can relate in this book is simple to understand, but difficult to define. It becomes the crux of the matter, the point-of-attack, in taking the path toward becoming a long-term success in the trading-investing arena.
Comfort.
You need to be comfortable in your methodology. You need to have confidence in it so that you can apply your methodology without hesitation, in the heat of the battle. It is important to have a methodology, no matter what it is, so that when the markets are at their most intense price change volatility, you can act without overthinking.
This is one reason I love to “scenario-ize,” whereby I discuss myriad possible scenarios that might play out in the macroeconomic or geopolitical spheres, or even in terms of sentiment, lop-sided speculative exposure, and technical vulnerabilities.