... and the answer is "maybe". OMG you say... is she kidding? Like a lot of help that is!

But indeed that is virtually always the answer... (not always - as in the times when the trade is clearly wrong, clearly against you in a major way and your priority strategy is prayer ... then the answer is yes. ... "Your first loss is your best loss")

But most of the time, the answer literally is maybe because the market is giving you conflicting ambiguous information. The trade has moved in your favor - but will it move more or pull back? Will it pull back and then move more (the likely scenario). Can you tolerate (physically and emotionally) the pullback? What if you are wrong about the pullback?

Yee-gaadddsss... who the hec knows?

Well that is it exactly. Believe it not, no one knows - not even Goldman. ONLY YOU can know. Only you can have pre-established the following:

1. The underlying reason and logic of the trade.
2. The confluence of factors that indicate it is time to actually put the trade on.
3. Factors that weigh in its favor - and factors that weigh against it.
4. What could happen that would indicate you truly are wrong?

Everyone puts SO much emphasis on money-management that they miss the THINKING part of trading. Things happen - unexpected news is a big one. (Except the thing about unexpected news is a really good trader is always ironically expecting the eventual unexpected news....)

Frankly it really isn't as simple as risk 1 to make 4. If it were, a lot more people would turn into great traders. It is risk x to make y while executing in a "good enough" manner on the four questions above... i.e. great trading requires at least good judgment!

We underplay the role of judgment and as such, do little to actually work on our judgments. Think of yourself as a judge... your trading strategies and tactics are the law, the market is the case (doesn't quite fit the laws clearly) and you have to decide. You are definitely not going to make the perfect judgment over time... you will get things wrong... BUT if you work hard at consciously figuring out how to make better judgments (which is definitely NOT just more data on your screen - more than 6 things and you can't decide anyway!) ... you will make better judgments.

And what would 20% better judgment mean to your year-end P&L statement?

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