“An expert is a person who has made all the mistakes which can be made in a very narrow field” – Physicist Niels Bohr
No matter how much we read, listen and study in any field, including trading, we will make mistakes, lots of them. Trading is like any other business. The real skill and success only comes after a lot of experience. One of the great things about trading is, unlike most other businesses, no mistake should be very costly. Trading is a business where we can test our knowledge and strategies with very little capital.
I don’t know of any other business where the exact same strategy can be just as effectively tested with a few hundred dollars of capital as with a few million dollars. We can test the same strategy and gain the same learning experience with 100 shares or one futures contract or a mini Forex position as we can with a position 100 times as large. We can literally test just about any trade strategy with just risk a few 10’s of dollars.
Traders have the opportunity to become an expert by making all of the mistakes in a narrow field as Niels Bohr described, with very, very little risk. Why do so many traders go bust before they have made enough mistakes to become an expert? It is almost always because they risk far too much for their account size on any one trade. You’ve been told this over and over again. I repeat it over and over again in High Probability Trading Strategies – limit risk, preserve capital. I even give you a simple formula that will calculate the maximum position size for any trade for your account. And let you know in no uncertain terms that if you exceed the maximum position size you are doomed to failure, and deservedly so. I won’t beat the lesson to death again here, but leave you with this –
If you don’t take advantage of the unique opportunity to become an expert at trading by learning with controlled and minimal risk, you deserve to go bust. This lesson and opportunity isn’t just for beginners. No matter how long you trade, you will constantly be learning new lessons by making new mistakes (and even repeating old ones now and then). But the fact is, not only should you never go bust but you should never have an unacceptable draw down if you control and minimize the risk with each trade decision.