Adrian Reid uses an anecdote about a 21-person mountain-climbing team to illustrate how individuals tolerate different levels of challenge. He draws a parallel to stock trading: traders must understand their personal tolerance for pain/drawdown and adapt position sizing and risk management so they stay within boundaries and can persist to reach long-term goals.
So we've got an amazing team climbing this mountain. There's 21 climbers and four guides and a whole bunch of porters. And just reflecting on all of the different people in the team, everyone has their own approach to climbing the mountain. One of the things that I'm observing is different people can cope and tolerate different types of terrain and different bits of the journey, some better than others, but. But everyone has their times when they're performing well and everyone has their times when they're struggling just a little bit. And it's a really interesting journey to observe how people cope and adapt to the environment. And one of the lessons or learnings that occurred to me when I'm watching everyone is that you need to understand your own tolerance to challenge, to loss, to drawdown, in particular in the markets, because some people are comfortable dealing with a lot of pain, some people are.
Only comfortable with a little bit of pain. In the markets, that translates to drawdown. So what we've got to do as.
Traders is really understand what our tolerance.
Is, understand how much drawdown we can.
Cope with, how quickly we want to.
Climb and make sure that we adapt our approach and our position sizing and our risk management accordingly. By doing that, we make sure that our journey in the training world, just like our journey up this mountain, really fits us and it's going to work for us in the long run so that we don't get puffed out. We'd end up with altitude sickness, we'd end up breaking our bodies or our accounts in the markets, and that's what it takes to be successful. Really understand your own objectives, your own requirements, particularly with respect to drawdown, to make sure that you always stay within your own boundaries, your own tolerances, so that you can be comfortable and you can just keep going, just keep going. And that's what it takes to succeed, to get to the summit, which is.
Way back there behind the clouds.
Just keep going, follow the process, make sure you stay within our boundaries, don't push our bodies too far and just keep going one step at a time. Make sure we rest when our bodies need to. And in the markets, it's exactly the same. Approaching it.
In a way that suits.
Our own personality and with the level of pain or drawdown managed and controlled.
To stay within our boundaries. If you do that, you can make the summit and you can make the summit in the markets. That's all for this video. See you in the next one.
