Two Giants

Today I'm offering something appropriate to commemorate the 200th anniversary of the births of Abraham Lincoln and Charles Darwin.

Trading the markets is truly a business in which only the fittest can survive over the longer term.

Darwin_charles Abraham-lincoln-picture


"Let us have faith that right makes might, and in that faith, let us, to the end, dare to do our duty as we understand it." Abraham Lincoln; February 27, 1860.

This does not mean that you should make a trade, and having faith that you were correct, blindly hold as losses mount.

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“It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is the most adaptable to change."  Charles Darwin

The validity of this statement to any trader needs no further explanation.  If you insist on using methods that 'used to work' when market conditions change, you are unlikely to last long.

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"I claim not to have controlled events, but confess plainly that events have controlled me."  Lincoln, in an 1864 letter.

If you are a trader, you dare not follow this example.  You must exercise good risk management to control unwelcome events.
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“An American Monkey after getting drunk on Brandy would never touch it again, and thus is much wiser than most men.” Darwin

That includes option traders who consistently make the same mistake again and again, hoping the result will be different this time.

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" A house divided against itself cannot stand."  Lincoln, 1858

Not true in the options world.  A hedged position increases the likelihood that the house (your portfolio) will stand forever.
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“The very essence of instinct is that it's followed independently of reason.” Darwin

Traders must understand this.  It's far better to use your mind when making trading decisions than to trade by instinct.  Using your experience to make quick decisions is not trading by instinct.

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One Response to Two Giants

  1. income trader 02/13/2009 at 7:34 AM #

    Great Post Mark!
    I am going to keep this one handy and read it often!
    Thanks!