It's About Respect

I spent the week away from the markets in Mexico.

The food and weather are hard to beat, but my favorite part?
Stepping away from the chaos of the markets and getting a chance to reflect.

Silence and solitude are rare in everyday life.
But when you find them, they have a way of bringing everything that was quiet within you loudly to the front.

On this trip, I kept coming back to risk management.

Not in the mathematical sense, but from a psychological perspective.

And I realized something: for me, it’s not really about risk.

It’s About Respect.

Respect for the ten years I’ve spent studying and refining my process.
Respect for the capital I’ve worked hard to earn and for the future me who will benefit from it.

Then it clicked.

If you respect yourself, you’ll respect your stop losses.
And the reason many traders don’t?

If they truly sat in silence and reflected, they’d probably realize it comes down to Fear.

It’s not just “ego” or overconfidence.

Fear that their process doesn’t work.
Fear that they aren’t good enough.
Fear that their effort is lacking.

“But what if I sell and it rallies 500%?”
You can get back in.
Unless… you don’t trust yourself to?

See, it’s one thing for someone to tell you this.
It’s another thing to believe it, understand it, and then act on it.

Your beliefs guide your actions.

If you truly believe in yourself, you won’t feel the need to hold onto losers past your risk levels.

Risk management isn’t just a strategy. It’s self-respect in action.

What’s staying in shape? Risk management.
What’s saving for retirement? Risk management.
These actions show respect for the future versions of ourselves.

How we play in the market is no different.

How do you build that belief?
By repetitively executing on your process, until confidence and self-trust become second nature. See beliefs guide your actions and then those actions strengthen those beliefs.

As Aristotle said, “We become what we repeatedly do.” And that’s powerful.

Selling that stock when it hits your 7% stop, watching it drop another 30%?
That’s a small win.

Buying that stock back because your plan tells you to?
That’s execution.

Every time you stick to your plan is a brick laid into the foundation of self-respect.

Show yourself some respect this week.

Because when risk management becomes second nature, it stops being a chore and it becomes a part of who you are.

Cheers,

Larry Thompson, CMT CPA

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