I view the objectives in trading as a three-tiered hierarchy.
First and foremost is the preservation of capital. When I first look at a trade, I don’t ask, “What is the potential profit I can realize?” but rather, “What is the potential loss I could suffer?”
Second, I strive for consistent profitability by balancing my risk relative to the accumulated profits or losses. Consistency is far more important than making lots of money.
Third, insofar as I’m successful in the first two goals, I attempt to achieve superior returns. I do this by increasing my bet size after, and only after, periods of high profitability. In other words, if I have had a particularly profitable recent period, I may try to pyramid my gains by placing a larger bet size assuming, of course, the right situation presents itself.
The key to building wealth is to preserve capital and wait patiently for the right opportunity to make the extraordinary gains. Victor Sperandeo