Trading Wisdom

Added on by C. Maoxian.

You have to figure out if you’re trading to win or trading not to lose. You need to trade to win. A bird in the hand is not worth two in the bush. You don’t have an edge. Every trade is a coin flip. Your only edge is trade management: cutting losses short and letting winners run. Don’t double down. “… quite a few participants felt that some sort of doubling down, or Martingale betting strategy, was optimal, wherein the gambler increases the size of his wagers after losses “ Keep your bet size consistent and in line with your bankroll. You have to be able to lose and lose and lose and lose and lose and keep your bet size consistent. You want to bet bigger to “make it back,” and you want to get revenge, that’s only human nature. Recognize the urge and resist it. Hide your P&L to conceal both your losses (which are known, but cumulative) and gains (which are unknown).

When I was a kid I worked as a photocopy boy in an H&R Block office. They offered something to customers called the “Rapid Refund,” which was a high interest loan on a tax refund. People would pay the $20, $30 whatever fee to get their $100 tax refund a month earlier than normal. This struck me and the lesson it taught is forever in my mind as I trade.

(I’ll add more when inspired.)