As weekly option traders we all know it is impossible to tame the markets. No one has the ‘perfect system’ that can corner the market and make millions of dollars without risk. If you have traded options at all, it is quite likely that you have also experienced losses. Since then you may have also become familiar with the concept of risk management.
If you think about it, risk management is all about losing money. It is not about making money, but focuses upon how we lose money. When is the last time you thought about losing money while you are trading you’re weekly options– or even monthly options? I should clarify a little more what I mean. Other than fearing a loss, when is the last time you thought about losing money?
Losing money is as much a part of trading options as making money but we do not spend enough time thinking about it. We put all our energies and attention on making money and neglect the art of losing money. If we are going to lose money then doesn’t it make sense that proper risk management would also spend time learning how to do it correctly?
This is what risk management is all about. It does not consist of a quick decision of when you are going to get out of a trade at the last moment. Risk management consists of learning how to lose money properly when trading options strategies. If you lose more than you want to then your risk management is either not being followed or needs to be re-evaluated. If you say you don’t want to lose anything, you are being unrealistic.
It is important as a trader to spend time learning how to lose money just as it is important to practice your trades so you are making money. This is what risk management is all about. Since losing money is such a large part of our investing experience, it is something that we should also spend time learning to do properly. This is what risk management is all about.
