- Preparation: If you put yourself in the best possible position and you lose money at least you spent that money wisely. Good things happen to those that are prepared because 90% of people do not know how to do it or are unwilling.
- Purpose: Acting with purpose. You prepared, you knew the risks, you executed the way you wanted to execute. In cold blooded evaluation you would do it the same with the information you had at the time.
- Protection: Losing the invisible money is how I have seen many people blow up. Invisible money is not locking in profits or losing more than your plan allowed. If you lose what you intended to risk you own the trade, if you lose more the trade owns you.
Your goal as a trader is to always reduce the time it takes to analyze, react, and recover. The best traders do this effortlessly after much thought, experiment, and practice. I lacked confidence because I thought about the wrong things or not at all and I was doing random things all of which made it too costly, emotionally and financially, to practice.
Waiting for the right opportunity increases the probability of success. You don’t always have to be in the market. As Edwin Lefevre put it in his classic Reminiscences of a Stock Operator, “There is the plain fool who does the wrong thing at all times anywhere, but there is the Wall Street fool who thinks he must trade all the time.”
Larry Hite described his conversation with a friend who couldn’t understand his absolute adherence to a mechanical trading system. His friend asked, Larry, how can you trade the way you do? Isn’t it boring? Larry replied, “I don’t trade for excitement; I trade to win.”
