Its always best to keep your bet size small. Every trade had the risk of becoming a loser. Successful long term trading campaigns need on thing above all else. Disciplined loss taking. IF you can train yourself to take losses in a disciplined manner, you have the foundation for successful long term trading.
Experienced traders as well as rookies are all subject to the same emotional foibles. Greed, Fear, Envy, Ego, Second Guessing, Wishing, Hoping, Praying.
If you find yourself wishing, hoping and praying when you are trading one thing is for sure. You are trading too big.
If you are emotionally attached to the outcome in the short run, that should be a red flag.
The old adage I learned from the time I stepped on the trading floor at the CBOT. Trade small. have a ball sounds too simple to be of any value.
Experienced traders are as vulnerable to breaking this rule as much as rookies. John Corzine must have known he was breaking a cardinal rule when he doubled down on his European Debt bet.
According to President Obama, Mr. Corzine was “one of the smartest people he knew”. That might very well be the case. IQ is no indicator of success in trading. News flash.
Tell the boys at Long Term Capital about high IQ’s and too big to fail. Read this from Wikepedia.
Two Nobel scientist Economics winners, combined w/ John Meriwether, former head of bond trading at Solomon…..Initially successful with annualized returns of over 40% (after fees) in its first years, in 1998 it lost $4.6 billion in less than four months following the Russian financial crisis requiring financial intervention by the Federal Reserve, with the fund liquidating and dissolving in early 2000.
Over trading. Adding to losers. “A fluke standard deviation of the 9th degree”. All words to explain the failure to follow the basic rule they teach all new traders. Have an exit plan. Don’t over trade. Live to fight another day.
So when I get stopped out of a losing trade. (see the CZ sale rec) I always remind myself that its OK to take a loss when its manageable. Good moves in trading are like subway trains. There’s another one coming along in a minute or two which you can use to re-load.