I was watching a documentary last week called ‘Don’t look down’, which follows the story of Sir Richard Branson and the hot-air balloon adventures he used as a publicity stunt to promote his airline Virgin Atlantic.
Even though Branson had never flown a balloon before, and 5 out of 6 people who had attempted to cross the Atlantic in a hot air balloon had died, he decided he would attempt to be the first person to make it across successfully.
It’s an incredibly dangerous expedition, and even though alot of planning went into it, there were still a number of unforeseen accidents that increased the risk, even to a life-threatening level…
… During the launch, he and his co-pilot lost one of their fuel tanks, having a direct impact on the distance they could travel across the ocean.
… On the 2nd day, the balloon kept rising uncontrollably and they were just minutes from having climbed too high when they managed to get a malfunctioning vent to open and reduce altitude.
… There were even some life-threatening challenges when they finally reached land, but I don’t want to spoil it for those who haven’t seen the documentary, so you’ll have to watch it to find out what happened.
Anyway, one thing that really caught my attention was a quote that Branson made:
“There is a danger that by having a positive attitude, something could go horribly wrong.”
As I’ve been watching the markets, especially over the last few days, this quote seems applicable.
The stock market has had an exceptional run, and even though there is (was) a positive attitude that it would continue, as traders we need to be prepared that “something could go horribly wrong”.
How can we do that? Here are 3 ideas:
- Consider all potential risks and have a plan – The Risk Management podcast episode with Robert Carver is a great discussion on some of the obvious and not so obvious risks we face as traders, check that out,
- Know your Risk of Ruin – Brent Penfold explains why this is so important and how to calculate it in episode 2,
- Diversification – Have a portfolio of diversified strategies that can cater for all types of market conditions, check out the 14 day breakout strategy challenge for details on how to build loads of strategies fast.
And a final point, another quote from Richard Branson, which applies to traders just as much as it does to business:
“… the most important thing is to make sure that even if the worst thing happens, you’re not going to lose everything,”
7 February 2018