The New Sell and Sell Short: How to Take Profits, Cut Losses, and Benefit from Price Declines, Expanded Second Edition

Question 12—Overtrading

Answer 4 Selection “A greater focus on the market” is incorrect.

When stakes become dangerously high, people become stiff with tension and are afraid to pull the trigger. The spontaneity and ease of adjustment deteriorate, and performance goes down accordingly. A trader whose position is too large for his account is not focusing on the market. He is focusing on the money. The feeling of tension clouds his mind, preventing him from reading the market’s signals. One of the key goals of money management is to put your mind at ease by setting realistic position limits and providing a safety net for your account.