 Welcome back to another episode of the Trade Hacker Mindset. In this episode, we are going to dive into the concept of really understanding risk. And this is a concept that comes out of Mark Douglas's book, Trading in the Zone. Trading the markets can be difficult to master and seemingly just out of reach. Professional traders have a secret. Trading requires total mental and emotional control. It requires the Trade Hacker Mindset. All right, so let's jump into the topic of really truly understanding risk. I really think that there's not too many things that are more important about becoming a successful trader than really understanding risk. In past episodes, we talked about taking on personal responsibility, obviously a positive mindset, but being able to truly understand risk is certainly one of the keys that it takes to become a successful trader. So when it comes to truly understanding risk, it's really about truly accepting that risk. And remember, we talked about just because you're engaged in trading and trading is an inherently risky activity, that doesn't mean you're actually accepting the risk. Accepting the risk means that you're truly accepting the consequences of that trade, whether it's a winner or a loser. You can't allow your defense mechanisms, these things going on in your mind, you can't let them kick in and take you out of the flow when something goes wrong. And if you're not accepting the risk, you can't take the risk of putting on a trade if you're afraid of the consequences. Because if you get in the habit of creating this experience that you fear the most, this works against you, it works out of the flow, this is what you're trying to avoid, you're trying to avoid that negativity. So in the book, Mark Douglas talks about a thinking strategy. And this is a set of beliefs to help you stay focused in the moment, in the flow while you're trading. And it's just a matter of letting the market unfold, being available to take advantage of these opportunities, not forcing things to happen, but just making yourself available to take advantage. And you're doing this without expectations, okay? You have no expectations of the market's behavior, you're just making yourself available. Because we know that the market is going to do what it's going to do, so you have to let the market do what it's going to do and just take advantage of that at specific times. So this is the frame of mind that you really need to have while you're trading, whether it's writing these things down each morning before you start your trading day, posting these on a sticky note so that you have it right in front of your computer monitor so that you stay engaged in this mental, in this mindset that can help keep you in the flow. Because as you're in the process of trading, as you're in this flow, as you're in this state of mind, the market's going to create a condition that you define and that you perceive as an opportunity. So you wanna put yourself in a position so that you can act on these opportunities, but it's a state of mind that's not related to the market's behavior. And if you can create this state of mind that's not affected by the market's behavior, this struggle that you've felt, this fear, this uneasiness, it'll just go away. And when the struggle goes away, then everything starts to become more and more easy. And it's at that point, then you can actually take advantage of these skills that you've acquired for trading. You know, when we're day trading, we have very specific setups using price action and volume primarily. But if you don't have the mental state of mind correct, then it doesn't matter what the strategy is and how powerful and such a high probability strategy it is that we're trading. If you don't have your mental capacity correct, you're not going to be able to make the correct decisions when those opportunities present themselves. So here's the challenge. You know, how do you accept the risks of trading without this fear or emotion? Because a lot of times when you start to perceive this risk, you subconsciously start to feel this discomfort or fear. So how are you gonna take advantage of this? How are you gonna remain confident when you're absolutely certain that you could be wrong, that you can lose money, that you can miss out, that you have that FOMO? With all these different things going on in the market in a very rapid pace and your mind's trying to process this, how are you gonna step up to this challenge? See, all these emotions, all these feelings of discomfort, of fear, they're completely justified and rational. But the reality is that every single trader has different beliefs about what these possibilities are. And every trader feels differently about what it means to be wrong or what it means to lose or miss out or leave money on the table. And since not everyone shares these same beliefs, not everyone is gonna share the same emotional reaction or sensitivities. Now, you might be thinking, well, of course, that's obvious. We all think and feel and see things differently, but it's not always that black and white. In the book, Mark Douglas's talks about an example of one of his traders that he was coaching, him and his daughter went over to a friend's house and this trader was deathly scared of snakes. So they go over and he didn't realize it, but the person's house that they went over to, their kid had a pet snake. And so they were sitting there eating dinner and having a good time and then after dinner, the kid brings out the snake and this guy, the trader, literally jumps across the room out of fear of the snake. And what baffled him was that his daughter, his young daughter, went over and started playing with the snake and wouldn't leave it alone. Like was just completely enthralled by the possibility of playing with a pet snake. And this trader couldn't understand how is my daughter not fearful like I am because I'm deathly afraid of snakes. But the reality is why would she be? She didn't share the same experience that he has. He hadn't told her that the snakes were dangerous. So why would she be afraid of snakes just because he was? It works the same way I've seen many situations where you have parents who love dogs, but for whatever reason, maybe if something happened when their child was just a baby, but sometimes when kids interact with dogs initially, they're super scared and their parents can't understand, well, I love dogs. I've always had dogs my whole life. My families have always had dogs, but so why is my kid scared of dogs when nothing's really ever happened? So it works both ways, but it's our own experiences and our own natural perceptions that really makes the big difference. So when it comes to trading, what seems to make sense to one person, it just isn't the case to somebody else. So you might assume the best traders in the world just somehow neutralize these fears, but the reality is that they may just not have the same fears that you do. And it's the ability to become self-aware of these situations that's gonna help you become more and more successful. So remember, when you have these degrees of struggle or fear associated with trading, this is gonna take you out of the moment. It's gonna take you out of the flow and therefore it's going to result in less profits. But if you accept this risk, then the market can't be perceived as threatening. And then if there's nothing threatening, then there's nothing to fear. And if you're not fearful, then you don't need courage. And if you're not stressed, then why would you need these nerves of steel? And if you're not afraid of this potential to get reckless with your trading, because you have the appropriate environment, you have the appropriate monitoring mechanisms in place, then you don't have this need for self-control. You know, I've heard a lot of traders say, well, I just, I don't have the self-control. I don't have the discipline. Well, it's because you don't have the right environment set up around you. We love trading for the freedom that it provides, but if you don't have these environments and these monitoring mechanisms in place and these things that are going to just automatically keep you disciplined and on track, you can't just go in and start winging it when it comes to trading. You know, I see this all the time where traders will come in and just wanna wing it because they're into trading because of the freedom it provides. But if you don't have this internal control, these mechanisms in place, it's always gonna end badly. Now, very few new traders go into it with those appropriate beliefs and attitudes and responsibilities and risk metrics in place, but you've gotta get to that point where you start trading with these appropriate beliefs and attitudes and about responsibility and risk. Everyone goes into trading kind of in that same cycle that we talked about in the past episode where you start out carefree, then you become scared because of losses, and then you go through this cycle over and over and over. It's the traders who break through this cycle that eventually learn to stop avoiding and start embracing their responsibility and risk. The problem is most people don't break through this cycle until they've had the pain after they've experienced the pain of a large loss or a large losing streak. So the goal here of talking about this of this whole podcast is to get you in the right frame of mind, to put you in the right environment so that you don't have to go through that experience of a massive, painful loss. Because sometimes that large loss is what causes traders to quit and if they would have just focused on their mental environment, they could have gotten over that hump, they could have broken through that cycle and started to become a successful trader. And I can't stress enough the topic of self-awareness. Be aware of these shifts taking place inside your mental environment. One thing that I do is while I'm trading, I'll just have a notepad next to me and as I'm placing trades, whether that's getting in a trade, getting out of a trade, whatever, if I'm in a trade and I'm not getting out and it's going against me, I write down exactly what I'm thinking. I write down exactly what I'm feeling because we all have these internal conversations with ourselves. Sometimes it's so in such the unconscious, subconscious realm of our mind that we don't realize it but if you really take the approach to focus on what you're actually thinking, what are these conversations going on in your mind and write them down, you are not gonna believe how powerful that is in helping you become a better trader. I've talked to a lot of traders over the years and very few can really explain what it is that accounts for their success when I'm talking about successful traders, except they talk in different kind of typical trader jargon, like cut your losses, go with the flow, let your winners run, which we talk about all the time, especially with one of our strategies that we call the runner, we talk about cutting losses quickly, letting our winners run and that helps with it from a strategic standpoint but it's also the mental piece that you've gotta focus on to get out of that cycle of going up and down with the roller coaster of your P&L. The bottom line is you've got, if you wanna be able to trade and profit like a professional, then you have to think like a professional and learn to trade without fear. Even if you've had these losses, which is what caused the fear, you have to be able to think like a professional and trade without that fear. Hope this episode was helpful if you'd like to become part of the trade hacker community. We have hundreds of traders interacting every day, not only helping each other from a mindset, but also sharing trade ideas and helping each other become more successful traders. Just go to community.navigationtrading.com. We look forward to seeing you on the inside. Take care.