Answer 9-1: B
Emotional trading is the enemy of success. Nobody can get high and consistently make money. A trader can get away with emotional trading for a short while, but unchecked greed and fear will destroy any account. Your goal must be to make the most intelligent trades, calmly weighing potential gains and limiting risks.
Answer 9-2: C
We all like to think we're smart—taking losses hurts our egos. Taking a loss means giving up hope that a trade will work out—and nobody likes to live without hope. Good traders are realists; hanging onto a losing trade is not a sound tactic.
Answer 9-3: B
A reluctance to take a loss is a sign of emotional trading. Adding to a losing trade shows that the trader is hanging on to a fantasy of winning rather than facing the reality of a loss. For a loser, a dream is alive as long as he holds his position. In fact, if you entered a trade on a set of indicator signals and those indicators reversed, what's the rationale for staying in that trade? It is not working out—get out to preserve your capital and look for a better trade.
Answer 9-4: C
A series of three losses can wipe out trader A, but trader B can survive a streak of 9 losses. Trader A is only three throws away from going bust, while trader B has enough capital to sustain him through 9 unlucky throws. All other factors being equal, the poorer of the two traders will go broke first.
Answer 9-5: B (II, III, I)
The first goal of money management is to ...