When you are learning about technical risk analysis, there is an important difference between taking a risk, and accepting a risk. Any trader is taking a risk when he executes a trade, but that doesn’t mean that he is also accepting that risk. All trades are risky because the outcomes are probable, but do most traders really believe they are taking a risk when they execute a trade? Do they really understand that the trade has a non-guaranteed, probable outcome? And have they fully accepted the possible consequences?

No, they generally have not done these things. There is often a psychological gap between assuming you are a risk-taker because you make trades and accepting the risks inherent in each trade. Most traders have absolutely no concept of what it means to be a risk-taker in the way a successful trader thinks about risk. The best traders not only take the risk, they have also learned to accept and embrace that risk. When you fully accept the risks, it has a profound implication on your bottom-line performance.

The best traders can make a trade without the slightest bit of hesitation or conflict, and just as freely admit it isn’t working. They can get in and out of the trades without a bit of emotional discomfort. The risks inherent in trading do not cause the best traders to lose their focus, self-confidence, or discipline. If you can’t trade without anxiety, and without fear, then you have not learned to accept the risks built into trading. Unfortunately, whatever the degree to which you haven’t accepted the risk is the same degree to which you will try to avoid the risk. Trying to avoid something that is unavoidable will have disastrous effects on your ability to trade successfully.

Learning to truly accept the risks in any endeavour can be difficult, but it is extremely difficult for traders. What are most traders biggest fears? Losing money and being wrong both rank close to the top of the list. Admitting we are wrong and losing money in the process can be extremely painful, and is certainly something that is avoided. Yet as traders, we are confronted with these two possibilities virtually every moment we are in a trade.

Learning how to redefine your trading activities in a way that allows you to completely accept the risk is the key to thinking like a successful trader. Accepting risk is a trading skill — one of the most important skills you can learn. Yet it’s rare that developing traders focus any attention or expend any effort to learn to do this. When you learn this skill, the market will not be able to generate information that will be painful to you. If the information the market generates doesn’t have the potential to cause you emotional pain, then there’s nothing to avoid. It’s just information telling you what the possibilities are. Seeing information and events objectively is your goal; and technical risk analysis is a key factor in trading successfully.

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