There is always something unexpected in the markets. Always something to generate a buzz or fear in investors, usually both. One of the trading maxims is this, ‘unexpected events can, and do occur, in the financial markets’. Just thinking off the top of the head we can think of a number of central bank surprises, stock surges (GME, AMC & NOK), and major market divergences that have all been to a greater or lesser extent ‘unexpected’.
Never go all in
This means that you should never go ‘all in’ on a trade. It is generally a huge mistake to go in more than 10% on any single trade. The total exposure could be kept down to 1% in most circumstances. Why should you avoid this? Because ‘unexpected events can and do occur’. The thing about the unexpected events is that you can’t easily see them coming.
Remember the SNB
Remember what happened in 2015? In January the SNB finally realised it was useless for them to keep trying to hold the EURCHF 1.2000 peg. The results were devastating.
So this is a warning against 1) letting a trade turn into an investment and, 2) over leveraging. To trade for your whole life you need to avoid both. If you got lucky, realise the luck and don’t repeat the mistake.