In his classic trading text “Trading in the Zone,” author Mark Douglas finishes his book with an exercise that he calls “Learning to Trade an Edge Like a Casino.”
And it’s this skill that separates most amateurs from professionals in this field. We might have a statistical edge, but we give up at the first hint of trouble and run off looking for the Holy Grail. Does a Casino do that? Not if they want to stay in business. They don’t panic when someone wins big, because they know the odds are in their favor.
It’s really worth your time to read through the entire exercise, but I’ll summarize the steps here:
How is this different from most retail traders running a system? In many ways! First, few precisely define their entry and exit rules, and then they compound this error by giving up too early when they find out that they are not truly comfortable with the aggregate risk.
Consider running the Mark Douglas challenge with your own strategy, and let us know if you need any help doing so!
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