The Risk Continuum, Part 2

The Risk Continuum, Part 2

By Andrew Menaker, PhD

Previously, I wrote about the risk continuum here. It’s such an important concept that I’m expanding on it with part II.

In the previous post I wrote that awareness of where you are on the risk continuum, with one end being extreme risk taking (letting losers run, chasing, impulse trades, oversized positions, etc) and the opposite end of extreme risk aversion (too anxious to enter, exiting too early, etc) is a very helpful tool for improving trading results.

Although most traders have a default position on the risk continuum where they tend to spend more time,

it is also common to move around on the continuum. Why is there a default position and why do me move around it at times?


The default position is largely a function of one’s background. And when I say ‘background’, I mean everything from early childhood experiences, how one was raised, the culture you grew up in, physical health (especially sleep and hormone levels), previous career experiences, past and current financial situations, relationships and social expectations (family and others); just to name a few.

Common factors underlying movement on the continuum include your current realized and unrealized P&L and/or any change in market conditions; as well as any changes in you (e.g. energy level, mood, birth of a child, relationship changes, planning for retirement, other life events, etc).

Recall in the previous blog post I wrote that awareness of where you are on the risk continuum is a helpful tool. And here is the second part – awareness of the why? Why are you at this specific point on the continuum?

As you can begin to see, the reason ‘why’ you are at any particular spot on the continuum is multi-faceted.

And knowing the why is often one of the most important factors in trading performance improvement.

In my coaching I often see traders show some initial P&L improvement once they’ve developed a real awareness of: ‘Where am I on the risk continuum?’ But the major improvement, the complete turnarounds that I’ve seen from losing to being very successful, or from breakeven or barely profitable to very profitable occur when the trader begins to truly understand the why aspect of knowing where they are (and what moves them) on the continuum.


Andrew Menaker PhD is a trading psychologist; you can read more about him at