A couple of weeks ago, I talked about risk and reward. This week, I am staying on the same subject and letting you in on a little secret. There is something you can do as a trader that can improve your trading dramatically and the best part about it is that it’s really easy. I am talking about saying to yourself, either out loud or in your head, that you are going to remove risk first when closing out any position for a profit or a loss.

You Are a Risk Manger First

I always like to tell my students that you need to think of yourself as a risk manager more than just an option trader. To me, that makes you cognizant of risk at all times. So, when you say to yourself that you are taking a profit or taking a loss, you may not realize that you are also removing risk. But if you say, “I am removing risk and taking a profit before talking about a profit or loss,” for example, you acknowledge to yourself that you are certainly removing risk and putting some money in your pocket.

Not Easy to Do

Trust me, I know this is not easy to do because I forgot to do it every so often when I am teaching my class. I correct myself to make sure I stick with the habit. In fact, I have had several students thank me for making them aware of risk to a degree that they never even realized.

Finally

As an option trader, you have many things to worry about because there are many moving parts with options. If you can become more in tune with risk and respect rather than fear it, I promise you will become a better risk manager. And isn’t that what we all strive to be as traders?

John Kmiecik, Market Taker Mentoring