Has anyone heard a really great rule of thumb or proverb or quote about creating positive expectancy? I've looked for years and never found one. A trader at CME once told me his philosophy was "cutting losses short and letting winners run creates it's own positive expectancy." That's as close to a rule of thumb as I've ever heard lol.
Frequent small wins or infrequent big rewards, in the end it don't matter which, just as long as your stomach can take it - JT (best I can do at this late hour)
The losses you cut short may turn to winners and the winners you let run may turn to losers and this is what happens in most cases. You cannot know in advance if the trade is a loss or a winner. Usually I say the same thing to someone I want to get rid off when I'm busy.
With 2 choices, let the profits run, sure that can be new territory[never tried before].Seldom do you see 2 equal evils; if i did i would look for another way.Good question; Wisdom is profitable to direct
if you are a trend trader, you know going in that most of the time the market chops. A wise King counts the cost before going to war. If you count the cost of the chop accurately you will eventually be sitting on the right side of a trend, and that is where all the money is made. Just another way of saying, "Cut your losses short and your profits will take care of themselves." These are just proverbs, it can take a lifetime learning how to trade them. But if you want a winning strategy that will keep you alive much longer than the gullible trader who thinks he has some secret for guessing the high and the low, it is a good foundation. Observe the losing trader who takes many small profits and always thinks his losers will chop back to breakeven, until he gets on the wrong side of a big trend and gets wiped out. Then just do the opposite. You can't have it both ways. Traders use stops because they assume the market will just keep running against them. Then they take a small profit because they assume the market will chop back against them. Make up you mind. If it's always going to chop, why use a stop? If you think it will just keep going why take a small profit? oh yeah, and the other trading proverb, "Don't cast your pearls before swine." Oh well, I now have a 50% hit rate.
Doesn't it make you wonder why though? Why is Carnegie correct... why do profits take care of themselves? What lets me take slightly more money out of people's pockets (on average) than they can take out of mine? It feels like the answer is right there, but this is what takes the lifetime to understand. And at the risk of being trampled, maybe it's better to leave it at that.