From Ivanhoff Capital:
When it comes to risk management, most traders and investors think only in terms of stop losses, position sizing, and profit protection tactics. There is no doubt that these are essential elements of the puzzle, but before we even get to them, we need to realize that there are two aspects of risk management that are equally important and often ignored – proper equity selection and market health.
Successful investing (or trading) is about improving the odds of success. If you want to catch a lot of fish, you have to fish at a pond with a lot of fish. If you want to catch big market winners, you have to look for them in a place that has historically produced big winners.
Most people struggle, because they are fishing from the wrong pond or at the wrong time.
Three out of four stocks eventually decline 75% or more from their IPO prices before they go bankrupt...
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