Think about these 3 mental risk management concepts when you are trading. As Edwin Lefevre put it in Reminiscences of a Stock Operator, "When you learn what not to do in order not to lose, only then can you begin to learn what to do in order to win."

1. Big-Win Dreaming
   This is a typical beginner trait. Consistency is the key to success -- steadily pulling profits using a sound, simple process incorporating runners (the last contract on a position, which you let go or come back to break even) to capitalize on larger moves or take position trades in a broker account separate from your day trading account.
   
   Successful athletes focus on the steps to achieve success, not success, and on their process, not the outcome.
   
   
2. Revenge Trading
   Vengeance trading occurs after losing, and a trader wants to get back at the market, risking emotional and financial capital. The vengeful trader wants to justify his or her prior losing decision, so, stubbornly, this trader enters in the same direction, intent on where the trade didn't go, rather than dispassionately looking at where another trade could go.
   
   The market is always impersonal and never wrong.
   
   
3. Position Size Management
   Traders with size envy will take larger positions than their capital allows (only risk 1 percent of your capital per trade). Most people don't stroll straight into a gym and lift 300 pounds. Traders must develop technical skills and financial capacity and grow emotionally, always judging their progress against their own levels, not others’ levels.

Keep an eye out for Part II of this article, in which we will talk about 3 more mental risk management concepts, including the critical ability to recognize the difference between speculating and gambling.

*Reprinted (and modified) with permission from Marc Nicolas of tradingemini.com

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