c05 JWBK182-McDowell April 25, 2008 15:51 Printer: Yet to come

CHAPTER 5

Not Every Trade

Will be a Winner

T

here is no such thing as 100 percent perfection on this planet—not as

long as the human factor is in play. Given this fact, and recognizing

that this fact applies to trading, we need to plan for the inevitable.

And the inevitable involves loss, account drawdown, and the peaks and

valleys of trading. Can you weather the valleys long enough to enjoy the

peaks? That will depend on how well you manage your risk and manage

the fact that not every trade will be a winner.

Gambling casinos understand that not every game of poker or black-

jack will go in their favor and be a winner for the house. In fact, they have

no idea which hand played will be a winner or loser. But, they do know

that they have a winning edge over the public playing at their casino and

over time they know they will win more than they lose. It is a game of

probabilities, just as in trading.

OVERSTATING THE OBVIOUS?

After reading this chapter title, you may be asking yourself, “Isn’t he stating

the obvious?” That may be true, but it is important to visit this seemingly

obvious statement. Depending on your personal experience level, novice

to intermediate to master, you will have a varying understanding of this

statement.

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