Moderation and Trading

This is my fourth column applying Socrates’ values – truth, justice, courage, moderation, and wisdom – to trading. Let’s look at moderation which has to be central to trading.

At the core of trading lie the two emotions fear and greed. Allow either one of these to dominate and you either don’t trade or you over trade. Fear needs to be diminished to caution, and greed must recede to desire. Both need to be present.

Let any attitude or emotion get out of control, and unless you get really lucky, you’re in deep trouble. Recklessness or timidity, anger or resignation, hyperactivity or laziness, intensity or loss of focus, perfectionism or sloppiness, all lead to loss of profit or outright deficit.

Trading is balance, balance, balance. And yet, as Aristotle said we must practice moderation in moderation. We need to know when to step up our size and take full advantage of an outsize opportunity. We need to know when to recognize danger and stand aside or get very small in size. Sometimes, in trading, even Oscar Wilde was right when he said, “Moderation is a fatal thing…Nothing succeeds like excess.”

However, most of the time the following proverbs do apply to trading:

  • “Enough is as good as a feast.”
  • “The half is better than the whole.” (Maybe)
  • “The lasts drop makes the cup run over.”

We need to be content with what we have, and value what we have achieved. This frees us to improve our performance in the future.

Let’s not be moderate in our vision of what our trading can produce over time. The more we make, the more we can make. The more we learn, the better we become. The principle of compounding of interest or profits or skills is one of the true miracles of wealth and success. It’s really important to dream without undue limitation, and follow those dreams to fruition.

The opposite is mediocrity, and mediocrity is not moderation.