I post this today as a reminder to anyone who is caught short in the big NLST short-squeeze.
Sometimes I’m asked why I don’t make more money. I have two responses to this: first, I am not actually a very talented trader; second, I trade for a living, so my goal is to make a certain income while taking as little risk as possible. Those who focus on making as much money as possible while ignoring risk will invariably lose almost everything, no matter how talented they are, just as Livermore and Niederhoffer did.
1. Hope is not a strategy.
2. Plan your entry and exit before you make a trade.
3. If you are unsure of what to do, get out.
4. Only trade when you have an edge.
5. Track all your trades. If a strategy loses money, abandon it.
6. Do not focus only on potential gains but also on potential losses. Trade only when the risk/reward ratio is favorable.
7. Don’t let a very good profit disappear or turn into a loss because you want an even bigger profit.