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Money management

If emotions can kill you in the markets, then the opposite must be true—to be unemotional enhances your prospects. Years ago, a friend of mine whom I respect as a successful trader cashed in on what I knew was a major score in the wheat market. I saw him in the Members Dining Room, and I said to him something to the effect of, “You must be feeling damn good having cashed in at the top.” He was a calm sort of fellow, and I still remember what he said. “George, when the markets treat me well, I don't dance in the streets, and when they do not treat me well, I don't beat myself up. Always remember this: Slow and steady wins the race.” Years later, I think I know what he meant by this. What a trader needs to do is not to think about the money, but instead to concentrate on trading correctly. If you trade right, the money will come. If you trade wrong, you're doomed.

A loser hopes too much. He has an inability to get out of a losing trade early enough, because he keeps hoping the market will turn back his way. Sometimes it does, but too often, his broker is the one forcing him out. Invariably, after he's forced out, the market comes back the way he thought it would, but by then it's too late. Why do so many people sell at the bottom or buy at the top? It's because they're acting emotionally instead of intellectually. One simple way to avoid this is not to get attached to any position. Trading should not be an ego thing. There is always another market tomorrow, and yet another the week after.


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