Is Your Trading Flying Too Close to the Water?


“It’s far more dangerous to fly too low than too high, because it feels safe to fly low. We settle for low expectations and small dreams and guarantee ourselves less than we are capable of. By  flying too low, we shortchange not only ourselves but also those who depend on us or might benefit from our work. We’re so obsessed about the risk of shining brightly that we’ve traded in everything that matters to avoid it.”

-Seth Godin

If this doesn’t sum up the majority of the investing community, I don’t know what does.

I’m not just talking about traders here. This goes all the way to the people like my mother who think that they’re being conservative by socking their money away in CDs that are paying LESS THAN 1%!

Most people are complete idiots when it comes to handling money. Even those of us who think we know a little something about the topic are still prone to acting foolish or impulsively.

Much like in the Icarus story that Seth Godin tells so well, many of us have been told time and time again not to be too overzealous with our investments. If returns seem too good to be true, they probably are.

And that’s good advice, but like Seth points out, no one ever bothers to caution against the pitfalls of being too cautious. You don’t hear people sitting around saying that they aren’t risking enough of their capital.

The biggest struggle that comes with being a trader is handling and understanding risk. But that doesn’t just mean risk in terms of what can go wrong. We also have to consider what could go right if we pushed a little bit harder, studied a little bit more, or found the guts to be greedy when the rest of the world is fearful.

If you are reading my blog, it’s probably fair to assume that you understand the danger of risking too much. But have you given thought to the possibility that you might be flying too close to the water?

Photo Credit: johnb/Derbys/UK. via Compfight cc