If You Can't Take a Small Loss, Sooner or Later You Will Take the Mother of All Losses

It is a fairly slow market session, with tech fighting to maintain a reasonably shallow pullback in lieu of a deeper correction.

Therefore, we should take a moment to revisit a core concept of trading, one that is indeed applicable to virtually all firms of speculation. 

And that concept was well stated by the famous trading author Ed Seykota, regarding taking small losses: “If you can't take a small loss, sooner or later you will take the mother of all losses."

In this day and age of social media finance bravado and, above all else, watered-down machismo, it has been seen as a sign of weakness by some to admit that a trade simply is not working out. 

In reality, this is part and parcel of being an every day trader--There is no such thing as always winning  in speculation. Instead of thinking about markets and trading as though it were a college football season, where the best teams either go undefeated or suffer merely one loss, a better analogy is baseball, where even the very best teams and World Series champions still lose quite often. 

Thus, when we take a look at the MoviePass play, HMNY, updated below, and how far it has fallen since last week, let alone early-October, it drives home the concept of taking small losses, one we preach almost daily for Members.

We do that for a reason, to avoid unnecessary drawdowns that longs in this name are feeling now. True, there could be favorable news which spikes the name back higher at any moment. But that is not a particularly high probability trading strategy over the long run. 

As for the broad market, we are staying light here as many stocks are essentially whipping around. More in my usual Midday Video.