The Intriguing Link Between Stock Selection and Trade Management

The central insight emphasizes that the method of stock selection may be less critical than the approach to trade management. A compelling illustration involves two traders relying on random stock picks—choosing stocks by throwing darts at the Wall Street Journal and applying a coin flip to decide their market position. The traders reportedly maintained a winning streak for 18 months, showcasing that effective management strategies—such as cutting losses and allowing profits to run—are fundamental to trading success. This highlights the importance of focusing on trade management techniques over the stock selection process, advocating for a shift in how traders view their strategy.