≈ Said no one ever. ≈
There are a few sayings Brazilians use to explain things no one has ever seen (I bet every culture has its own set). They are funny in Portuguese, let me know if a free translation will kill the funniness. Here they are:
- Codfish head;
- A baby pigeon;
- A picture of a mother-in-law in someone’s wallet;
- An honest politician.
The stock market has its own baby pigeon, its own codfish head, its own mother-in-law picture in a wallet: old, bold traders. No one has ever seen this specimen around. They only exist inside the imagination of reckless traders. To them, capital preservation is something they don’t wanna hear about; that’s for mom and pop.
It really doesn’t matter which system you are used to trade or what strategies you like most; Delta, Vega, Theta, single or multi-legged. Market conditions don’t matter either. With that being said, there is one thing that ALL systems and strategies have to have in common in order for you to become an old trader: Risk Management.
Traders seem to be always looking forward to incorporating the newest cutting-edge EDGE to fit into their trading bag of tricks. In a market that works on high daily doses of Xanax & Coffe, two simple things like POSITION SIZING and RISK-REWARD RATIO can work wonders.
Remember Coach Slawek’s rules?
- Trade small, win big.
- Find tight entries for your size.
- Know what you are risking when getting into the trade.
- Always use stop losses, because mental stops never work right.
- Never average down, unless you have a plan for it.
Bold traders never get old, I suppose. They just turn themselves into baby pigeons.
Chart of the Day
The Cheetah Runs
Tesla (NASDAQ: TSLA), the most shorted stock in the US, is taking its revenge against those who have been swimming naked.
- TSLA’s high on Feb 4th: 968.99
- TSLA’s 200-SMA level on Feb 4th: ≈298
That’s what you call a spread: ≈225% difference.
Video of the day
Trading Concept Check: The importance of good risk management
The importance of good risk management cannot be overstated. There are old traders and there are bold traders, but there are no old bold traders, this popular idiom cleverly informs us that those who over position size and fail to use stop losses will not be traders for long.
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