For the next few weeks, we will be using quotes from Edwin Lefevre and his masterpiece trading book, “Reminiscences of a Stock Operator.” Enjoy!
Reminding Ourselves: Risk First
It is so easy, in the stock market, to want to make big money—today.
However, if we let this emotion rule over us, we may start looking for ways to get into a stock fast, with ample amounts of risk, and not play the game the smart way.
From Edwin Lefevre:
“It is simple arithmetic to prove that it is a wise thing to have the big bet down only when you win, and when you lose to lose only a small exploratory bet, as it were. If a man trades in the way I have described, he will always be in the profitable position of being able to cash in on the big bet.”
-Edwin Lefevre
The Master’s Path
What the masters all have in common is how they trade. Where human nature is to hold losing stocks until they come back…the master traders cut those losses quickly.
Where human nature is to sell winning stocks and take the profits…the master traders roll those profits into more leverage to make a small win a massive win.
This is the way.
To Do: Take time to analyze your trading system and create rules, or review rules, that help you scale in an out of trades as you are winning, and scale down as you are losing—on your timeframes.
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