Three Trading Iron Laws Learned from Losses
After trading for 5 years and losing a lot of money, I came up with three iron laws:
Iron Law 1: Stop-loss is always right—even if you’re wrong, it’s still right
- A stop-loss may cause you to miss the move, but not using one can mean liquidation
- A stop-loss is a cost, not a loss
Iron Law 2: Position size determines life or death
- Light positions can weather volatility; heavy positions wipe you out with one shot
- Never go all in
Iron Law 3: Don’t do trades you’re not confident about
- Don’t trade what you can’t understand
- Don’t trade without a plan
- Don’t trade when you’re emotional
After trading for 5 years and losing a lot of money, I came up with three iron laws:
Iron Law 1: Stop-loss is always right—even if you’re wrong, it’s still right
- A stop-loss may cause you to miss the move, but not using one can mean liquidation
- A stop-loss is a cost, not a loss
Iron Law 2: Position size determines life or death
- Light positions can weather volatility; heavy positions wipe you out with one shot
- Never go all in
Iron Law 3: Don’t do trades you’re not confident about
- Don’t trade what you can’t understand
- Don’t trade without a plan
- Don’t trade when you’re emotional