Certainly, that's what most traders believe. I tend to disagree though. In my opinion we have something much greater at risk, that very few of us consider during the 'learning phase'.
The American political journalist and author, Norman Cousins, is quoted as saying,
'Death is not the greatest loss in life. The greatest loss is what dies inside us while we live.'
Along similar lines, I would argue that loss of capital is not the greatest loss in trading. The greatest loss is what we lose from within.
Loss of funds is recoverable. Losses of self-esteem, self-belief, or passion for the process of trading, are not so easy to recover.
So, think about that next time you feel tempted to widen your stop, or remove your stop. Think about it before you enter your next impulsive, emotion based trade. Think about it if you're trading without a clearly defined trading plan.
If you suffer financial losses at these times, how will it affect your mindset? Will the losses that result from your amateur and undisciplined actions allow you to move forward to the next trade with greater confidence, or will they feed the forces of frustration, anger, depression and fear, further damaging your chances at consistent, confident and disciplined application of your trading plan.
Drawdown in your psychological capital is much harder to recover, than is drawdown in your equity balance.
So, manage your risk! Not so much to protect your finances, but in order to protect your much more valuable psychological capital.
Placed First in The Strategy Runner International Trading Tournament and First in the Surefire Trading Challenge. The fact that you haven't heard of me is no surprise. I have never been comfortable in the spotlight and have purposely remain "underground".
I don't write books...
I don't try to get on CNBC, and...
I don't go from city to city doing "dog and pony shows" so I can sell a room-full of people my overpriced,untested, piece of crap, blinking light, "black box" software.
I'm a trader,a Pilot and an amateur ocean explorer.
Trading is what I love and do as a profession.
I also enjoy teaching and helping other traders get an edge.