4. Position for survival
In many respects the fictional character Gordon Gekko in the film Wall Street was a terrible role model for traders as he was greedy, vindictive and egotistical. It’s the sort of characteristics that lead to reckless over-confidence and the illusion of being smarter than the market. However, he did impart one piece of very useful advice to his young apprentice Bud Fox:
For a trader that means keeping the amount at stake on each trade small. The great traders recommend less than 5% some even go as low as 1% – that means a trader can endure a string of set-backs and still have enough capital to fight another day and to stage a comeback. Trading is essentially a defensive game and capital preservation is of up-most importance.