A trader’s returns have been directly proportional to his or her ratio of courage to fear. Buying ugly markets has made superior returns; stopping out of long positions on ugliness has led to negative timing alpha. Buying stocks when fear is gone and markets are orderly has not paid off.
Formula for trading success
If there’s a formula for trading success, prudent courage is not a bad start.
If there’s a formula for trading failure, acting on fear–fear of missing out, fear of losses–is also not a bad start. It’s amazing how ramping up trading risk/size and trading frequency can turn prudently courageous traders into fearful ones.
If there’s a formula for risk-taking, trading the largest size that enables you to stay prudently courageous during times of ugliness is a good starting point.