Almost every Forex and Futures trader that we have spoken to has admitted to, at some point, taking a trade outside their method and/or outside their risk tolerance. We were curious to see what makes people take those types of trades and whether we can find ways to eliminate this negative behavior.
We engage in situations where we have to deal and assess the level of risk on a daily basis. Whether it’s crossing the street, getting in your car or making investment decisions and placing trades, your brain always analyzes the potential risk and reward tradeoff – but not always in the most rational ways. There are instances where you will be prone to taking higher risks than necessary. In trading, this rarely ends well. In fact, the professionals want you to take these unnecessary risks.
You must also keep in mind that risk/reward evaluations also take place on a psychological