“That’s why most people lose money as individual investors or traders because they’re not focusing on losing money. They need to focus on the money that they have at risk and how much capital is at risk in any single investment they have. If everyone spent 90 percent of their time on that, not 90 percent of the time on pie-in-the-sky ideas on how much money they’re going to make. Then they will be incredibly successful investors.” -Paul Tudor Jones
What if a traders step one was not profits but the planned management of losses? What if the key to returns was to limit draw downs not to win all the time? What if the thing that caused new traders to fail was primarily a traders mental ruin and that this was caused primarily by losses? One really big loss or long strings of consecutive losses can quickly cause traders to give up. Also, long winning streaks and big wins can also be erased quickly by big losses that are taken due to position sizes that are too big for a trading account to handle.
“Risk is a no-fooling around game; it does not allow for mistakes. If you do not manage the risk, eventually they will carry you out.” -Larry Hite