John Benedict on Risk Management


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Everyone has a buy discipline and can tell you what they like, almost nobody will tell you when or what they will sell. Having a risk management approach means being able to plan for the unexpected outcome. We all expect our
trades to work but what will you do when it doesn’t? Having a disciplined approach to investing and incorporating risk management allows me to not be afraid of failure.

I believe that technical analysis works because investors are driven by emotion. Human emotion has not changed since our pre-historic days, and is still driven by the basic fear-greed and flight-fright responses. I believe these emotions can be captured in stock charts and then viewed using patterns, cycles and indicators, and charting of price. Because investor behavior tends to repeat itself I believe that one can recognize these behaviors and possibly even attempt to predict how price may be affected. There are several ways this can be done.

The most successful traders and investors I know are the ones that have the discipline to stick to their plan. Also there is no substitute for just putting in the time. Recent research suggests that it takes up to 10 years to master something. Here is advice to anyone looking to start investing.
1. Learn from others.
2. Failure will happen often especially early on. Be prepared for it.
3. Don’t fear failure, embrace it.
4. Do what works for you. Over the course of time you will try to copy and
emulate other traders. You will learn you won’t have the same success.

Source: Chapter 40 – One Step Ahead of the Herd by John Benedict, @geckojb

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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