Preseravtion of capital (Not really)
I find all this talk about preservation of capital quite interesting. Traders put their capital into stocks/options, whatever. The more capital you put in, the more you can win/lose. By definition, if you sell when your investment goes down to "preserve your capital", you've lost capital, full stop.
I think what we all mean by preservation of capital is:
A) Get out of this position before I lose ANY MORE capital
B) Hope my other plays will make up for this LOSS of capital
Sometimes I like to think of the stockmarket as a big casino, the difference being investors have the same edge that the house has in a real casino: the trend is historically up and in your favor.
A blackjack player may have a hot streak, but the pit boss knows that day in/day out, the more hands that are played, the more the real casino profit will approximate the real house advantage %. So to me, and investor is the pit boss who sits there for years and knows that as long as people flock to the casino the will be money to be made, whereas a trader is the blackjack player looking for the hot streak.
Now, what would you rather be, a Blackjack pitboss or player?
I'm more like a pitboss at a big casino that sneaks out a few times a month and gambles away drunk at the casino across the street (of course leaving all credit cards/ATM cards behind) :-)
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