“It’s not whether you’re right or wrong that’s important, but how much money you make when you’re right and how much you lose when you’re wrong”. Legendary trader Stanley Druckenmiller says, in ‘The New Market Wizards’ book, that’s the most important lesson he learnt from his time managing money for the ultra-legendary George Soros. If those two believe that, why doesn’t the vast majority of traders who are spending their time losing money...?

Almost all of the most successful traders throughout history learned early on in their careers (and probably the hard way!) that the “Holy Grail” in financial markets simply doesn’t exist. Novice and amateur traders typically search for extraordinarily high win/loss ratios, to comfort a demanding, human ego in the never-ending quest to be “right”. That is extremely seductive, yet wrong – again, as Druckenmiller states, “Soros is also the best loss taker I’ve ever seen”...meaning controlling the losses is absolutely essential if you are to stay in the trading business.