2021 was a good year if you were long risk across a number of asset classes. But not everyone found the environment successful, subsumed by the deleterious barrage of negative news headlines about the COVID-19 delta variant, the omicron variant, supply chain issues, inflation, the US debt ceiling, Evergrande…the list goes on.
And yet, despite these obstacles, they really represented nothing more than bricks in the ephemeral wall of worry. Traders that were able to plan their trade and trade their plan came out on top.
For myself, there were numerous times in 2021, with the benefit of hindsight, that my analysis was correct, my strategy was correct, but my risk tolerance was too timid. In other words, I left potential profits on the table by not having enough conviction, too intimidated by what I was reading and seeing in the news.
Which brings me to this comment from George Soros to Stanley Druckenmiller, veritable macro trading legends:
“One billion dollars? You call that a position?” George Soros asked his partner Stanley Druckenmiller. Soros continued, “It takes courage to be a pig.”
Druckenmiller’s insight into this comment is timeless:
“It’s not whether you’re right or wrong that’s important, but how much money you make when you’re right and how much you lose when you’re wrong. The few times that Soros has ever criticized me was when I was really right on a market and didn’t maximize the opportunity.”
The point is that when you’ve done your analysis, when you’ve created your strategy, when you size your risk appropriately, you need to act with courage – with conviction. Don’t let opportunities slip by; you miss 100% of the shots you don’t take.
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