The Saturday Cut: Your Returns Can't Outperform Your Risk Tolerance
Markets move on. These ideas don’t.
Three themes pulled this past week’s Daily Updates.
Judge Your Process by Results, Not Activity
It’s easy to confuse productivity with progress.
A trader who makes fifteen trades in a week can feel more engaged than someone who makes three. The screens are always on. Every move demands attention. Every headline feels urgent.
That doesn’t necessarily lead to better results.
Some of the best periods in trading come from waiting patiently, identifying a handful of exceptional opportunities, and committing your attention where it matters most.
The objective isn’t to stay busy.
It’s to stay selective.
The market doesn’t reward the person who clicks the mouse most often. It rewards the person who waits until the odds become meaningfully better than average.
Good trading should simplify your life, not consume it.
If you’re constantly monitoring a dozen marginal positions, there’s a good chance the market—not your process—is setting the agenda.
Review Your Thinking, Not Just Your Trades
Most traders conduct a post-mortem by looking at what they bought and sold.
That’s useful.
It just isn’t enough.
The more revealing exercise is to revisit what was happening in your head while those decisions were being made.
What assumptions felt obvious at the time? Which voices were influencing your thinking? What outcomes did you dismiss because they seemed impossible?
Memory has a way of rewriting the past. Once we know how something turned out, we quietly forget how uncertain it actually felt in the moment.
That’s why it’s so valuable to reconstruct your mindset instead of simply reviewing your results.
Sometimes the biggest mistake wasn’t the trade.
It was the certainty behind it.
If you can identify the beliefs that repeatedly lead you into trouble, you’ll improve much faster than if you simply memorize chart patterns or entry rules.
The quality of your decisions begins with the quality of your thinking.
Pro tip: Use you phone to sort your photos by the time frame you want to review. I don’t know about you, but when I look at photos of a restaurant I was at, people I was interacting with, a location I was at, I immediately think of how I feeling about the market and my trading that day. It’s a great way to review your mindset on a specific day.
Your Risk Tolerance Determines Your Returns
Ask a group of traders how much money they’d like to make, and you’ll get remarkably similar answers.
As much as possible.
The more interesting question is how much risk they’re willing to accept to get there.
That’s where the answers begin to diverge.
A trader in their twenties with no mortgage and decades ahead of them can recover from mistakes that would permanently alter someone approaching retirement. Neither approach is inherently better. They’re simply different.
The mistake is assuming everyone should pursue the same returns.
Your financial goals are only half the equation. The other half is emotional. How much uncertainty can you genuinely tolerate before you stop following your process? How much volatility can you absorb before your decisions begin to change?
Your returns will always be constrained by those answers.
The goal isn’t to maximize profits at all costs.
The goal is to maximize profits within the amount of risk you can consistently live with.
Once those two things are aligned, the market becomes much easier to navigate.
This is the thinking.
The Full Daily Update is where ideas become action—best setups, best odds, least risk.
All opinions expressed in The Lund Loop are my own personal opinions and don’t reflect the views of my employer, any associated entities, or other organizations I’m associated with.
Nothing written, expressed, or implied here should be looked at as investment advice or an admonition to buy, sell, or trade any security or financial instrument. As always, do your own diligence.