The art of making money
Here is an analogy...
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A man asked a sculptor (a professional trader):
"How do you make such beautiful idols (good profits) from stone?"
He replied: "Idols & images (profits) are already hidden there... I removed unwanted stone (losses) only...!"
There are two kinds of skills in trading.
1. Making profit (eg. finding an edge in strategy)
2. Avoiding or reducing loss (eg. having a stoploss)
Making profit is simple. Buy low and sell high ! There is really nothing much to learn how to make profit. Its very obvious even to a 10 year old boy !
Then where are we spending much of our time in learning ?
Are we spending most of our time to learn how to make more money than previous trades ?
No.
We are spending more time and effort to avoid or reduce loss that we made the previous trades.
We are spending 99% of our time to learn how to avoid or reduce loss.
The question is "Are we aware of that?"
What we have invented using all our time ? A stoploss ! ! !
We are spending hell a lot of time and effort and the end result is a stupid stoploss theory.
The reality is that we are not accepting that all that we are trying to do in trading is simply to avoid or reduce possible losses.
Why we are not accepting that reality?
Because we think its stupidity to spend huge amounts of time for one simple thing like avoiding or reducing losses in trading. Our ego does not entertain such a simple yet genuine fact.
We can not accept that its the only thing in trading we are doing all the time ! ! !
Yet we subconsciously and unknowingly do the same stuff of striving for staying away from losses as much as possible and pretend to do something else. Probably pretending to try to make more profits.
This contradiction of doing something and pretending something else has moved traders to nowhere. All that we have in hand is a stupid "stoploss" theory and an unwanted risk management. Investments need risk management. Not trading. All the bloody risk management must be built inside the strategy itself.
We are not aware of what we really doing and end up creating inefficient strategies and add an unwanted supplement called stand alone risk management. Pathetic !
I "consciously" spent all my time to avoid or reduce losses. Then I realised that a fixed target and a fixed stoploss are the culprits in trading. And that we can have a open target and avoid loss instead of surrendering to a stupid stoploss.
"The art of making money" is all about avoiding or reducing loss. Making profits is the last but not the least thing.
