Feeling Control Over Inherent Uncertainty
Are you a control junkie? Many successful people achieved their goals through persistence and self-discipline. They exercised full control over themselves and their environments to beat the odds. When your money is on the line, it's natural to want to achieve as much control as possible. You want to do everything possible to protect yourself, even if it means obsessing over things that you can't possibly change. There's taking realistic precautions, on the one hand, and overdoing it on the other. Ironically, if you strive for too much control, you'll crack under the pressure. Whether it comes to playing sports or trading, unless you can feel relaxed and ready to respond without repercussions, you'll fail. It's vital to feel free and creative.
The markets are uncertain. Sometimes we must accept the fact that we just can't control everything; what is meant to happen is going to happen. All the obsessing, anticipating, and planning isn't going to change matters. Rather than waste your time and energy trying to change and control events that you can't possibly change, you must learn to accept what you cannot change. And after you do that, you can diligently work on the things that you can control.
What can you control? You can use proper risk management. You can look at past price patterns and try to estimate how much you could lose on a trade up front. You can then make sure that the total possible risk is minimized. When you control risk, you may not guarantee a win, but you'll know that you can survive a worst-case scenario. It will remove some of the uncertainty inherent in trading the markets, and you'll feel more in control. You can also try to anticipate all possible adverse events that may go against your trade and develop a clearly defined exit strategy should you encounter these adverse events. Once you know that you've done everything possible to control what you can control, you'll feel content.
A second way you can gain control over uncertainty is to take a psychological approach. By using specific thinking strategies, you can feel more in control. Ironically, one way to feel in control is to accept that you can't be in complete control all the time. Psychologists call this phenomenon the "paradox of control." Many times, we put stress on ourselves by trying to be perfect. We feel that we absolutely "must" make a profit or that we "should" make a profit. You can calm down and feel a greater sense of control by changing a "must" or a "should" into a "wish." For example, instead of thinking, "The next trade must be a winner," you can think, "It would be nice if the next trade were a winner, but it doesn't need to be." And if you controlled your risk on the trade so that you could actually lose and recover relatively unscathed, you'll feel free and empowered. If you stay focused on the big picture, you'll calm down. If you manage risk, you can remind yourself that the outcome of any single trade is relatively unimportant. It is your profitability across a series of trades that matters more. So don't crack under the pressure to be perfect. Accept the uncertainty of the markets, and ironically, you'll feel more in control. And when you feel free, creative, and in control, you will trade more profitably.