Big picture is about taking risk but never risking more than you can afford to lose.
At the same time, big picture is also about mean reversion. This is why I like using a metric like an RSI that will help you quantify and filter when something that might feel like an opportunity really isn’t.
As far as the risk goes, I always tell people to take the “Pillow Test.” If you can put your head down on that pillow and sleep at night, you’re probably taking the appropriate risk. If however you can’t sleep, time to reduce that exposure until you can.
I’d also add that it’s critical to identify the point at which the investment would no longer be compelling BEFORE YOU MAKE THE INVESTMENT.
That’s to say, if you already have an idea of what would be an exit point before you get into the position, it will make the whole process a lot less stressful and significantly increase your probability for overall success.
Too many out there make the mistake of only considering the price at which they initiate a position, without recognizing that the price at which they would exit (for a loss) is just as important, if not more important.
So if you want to talk psychology, that’s where I think the focus needs to be.
Best - JK 👊😎
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