Even though I can cut losses, I can't win! [To avoid becoming loss-cutting poverty]
I often hear people say they can’t cut losses,
but some say they can cut losses but can’t winit seems there are quite a few such people.
Aren’t these people thinking about loss cutting in isolation?
There are other aspects such as entry, exit, and money management, and
you need a balance that yields overall profit.
For example, suppose there are two winning traders, A and B.
A has a low win rate, but when profitable the gains are large (small losses, big profits), so overall he wins.
B tends to cut losses fairly large, but has a high win rate, so overall he wins.
A and B use different methods, and their ways and extents of cutting losses differ.
Each employs a loss-cutting approach that suits their method (balanced).
Therefore, simply imitating someone else’s loss-cutting method won’t make you win overall.
Even if you don’t imitate anyone, if you ignore your own method and only think about cutting losses in isolation—if you can only cut losses but can’t achieve a balanced overall result—then it’s meaningless.
Even if you can cut losses well, a loss-cutting plan that isn’t balanced overall will only accumulate meaningless losses.
Series: Archive of past articles
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