Risk Management

Whether responsive or initiative each trade must have a plan set in place in order to minimize risk and maximize profits. The sure way to gamble is to buy or sell short a random amount of shares or contracts just because it fits the buying power in your brokerage/retirement account. Failure to size in correctly according to your pre calculated stop and target can result in slippage per trade, overall financial/psychological distress, paralysis by analysis, FOMO (fear of missing out), and can cause bad habits to leach over into your systematic/discretionary approach. The law of large numbers clearly defines every trade no matter what edge is given as always being 50/50 over an infinite amount of sets. Losing or winning streaks are dealt in terms of mean reversion with the end result being 50/50. What separates a profitable trader from a break even/losing trader is one of 2 things (risk management and market psychology).