“But Isn't Trading A Risky Business? "

A lot of people say to me that trading must be a terribly risky business and why would I want to enter such an arena when there must be other far safer ways to make a living.

My answer is always; “Yes, there are safer ways to make a living but there is no other business where I feel safer than in trading!”  

Let me explain.  If I wanted a safe way to make a living then I would have become an employee of a Government department, a large company that had a strong labour union or some other similar type of tightly structured employer such as education, healthcare or similar.  Whilst I applaud people who dedicate their working careers to these worthwhile endeavors, this type of work was not for me.

While I was growing up my father was a self employed plumber, my grandmother was a restaurateur and most of my extended family were running their own small businesses so it was no surprise that I always wanted to run my own outfit ~ to be master of my own destiny.

While I was growing up there was plenty of discussion around the dinner table about how tough business was and, occasionally, how business failure was part and parcel of the game.  So I was under no delusion that owning your own business was all wine and roses.

I saw friends having to leave expensive schools and homes being sold out from under them because hard times fell on their family businesses, often through little or no fault of their own.

Soon after leaving college I started my own small contracting firm, made some money and sold out in order to buy another larger but poorly run business.  This started a sequence of buying run down businesses, turning them around and selling them for a profit.  This eventually lead to forming my own property developing company which I headed up for 28 years before selling out in 2005 ahead of the 2008 global financial crises.  

In telling you all this I am highlighting one thing;  I had kept my eye on RISK throughout this whole time.  Limiting risk, mitigating risk, being highly attuned to risk and never thinking about the money I could make ahead of being highly aware of the money I had at risk while getting there.   I did not always sidestep the consequences of risk and I can honestly say that although I have never been bankrupted, I have come perilously close to bankruptcy more than once. 

The problem with business risk is that it is bottomless, it is uncontrollable and there is no way out once the trouble starts.  Things quickly go from bad to worse, the liquidators step in and before you know it your assets are sold at fire sale prices, your home is often taken and you are left with no cash, your credit cards get gobbled up by the ATM machines and you and your family are living with your elderly mother in her government flat.  I'm not exaggerating – this does happen and it will continue to happen in the future.

The advantage of trading risk is that not only is it highly controllable, but it is actually defined and locked in before any trade is taken.  This means that before I take any trade  I ALWAYS know what my dollar risk is.  This risk is controlled not only by an order in the market to close me out if the price goes against me but I always define and limit my risk to just one percent of my trading capital at any one time.  In business I could never do this. The risk in business was unable to be defined and certainly not able to be closed out at a predetermined level once things went the wrong way.

Trade With Precision’s approach to risk management is that you always predetermine your risk, and limit that risk to a maximum of one percent of your trading capital before you enter any trade.  This way, even if you had twenty losing trades in a row (and I've never actually heard of anyone experiencing that) your trading capital would be reduced by close to 20%, but at least you would be still afloat to trade another day.  Your house and your children's future would not be lost!

So in summary, this is why I feel safer trading than I ever felt whilst in business.

I manage my RISK first and foremost and it is just me and the markets with the ability to enter, stay or leave at the click of a mouse!

By Graeme Kennerley

Make sure you join us for this week's webinars where you can learn a very powerful trading strategy with clearly defined risk levels.

This week's webinars are:

High Performance Trading For A Busy Lifestyle runs on

• Tuesday 29th April @ 5am New York, 10am London, 7pm Sydney, 9pm Auckland

Or Alternatively (depending on time zone)

• Tuesday 29th April @ 3pm New York, 8pm London, 5am Sydney (next day), 7am Auckland (next day)

Regards,
The TWP Team
www.tradewithprecision.com