Embracing Risk

risk

My house has a great view of the Ohio River. One of the tradeoffs to get that view is that I don’t have any off street parking.

The house is also on a one way street, and most people that use my street are about to make a right turn onto the bridge about 100 yards from my house. The road also begins to open up to the right as you pass my house.

What this means, is that if I park my car right in front of my house, there is an extremely high probability that someone will hit it…..especially if it is a Friday or Saturday night when the bars let out. I’ve lost three mirrors thus far, and my neighbors have lost quite a few more.

For this reason, I park on the other side of the street.

But on that side, about three times each year, the large trees in my neighbors yard have dead branches fall off of them onto the street below. Last year, one of the branches landed right on another neighbor’s rear window. Lots of damage.

While my car is statistically much safer on the tree branch side, that doesn’t change the fact that I am going to be furious on the morning when I wake up to find a tree branch smashed my windshield.

Regardless of where I park, there is risk involved.

In a similar fashion, every product I purchase to resell on Amazon implies some level of risk. I am almost certain that I can sell all of the Pyrex pans that I sent in last week, but there is no guarantee that someone doesn’t undercut my price this week. There is some level of risk associated with all of my inventory.

This concept of risk is obvious to traders. We deal with risk on every position we trade. While it isn’t statistically likely to happen, the bottom could fall out of any stock at any time. This is the risk we take.

In order to trade, sell on Amazon, or park on my street successfully, you have to be able to accept that there is always going to be some risk involved. Things might go wrong, but the fear of what could happen can’t affect your decision making process.

You have to attack each day according you your strategy, without being influenced by the potential downside. If that downside happens, you have to be ok with it. That’s part of the game.

Photo Credit: Tambako the Jaguar via Compfight cc