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"The most important rule of trading is to play great defense, not great offense."
—Paul Tudor Jones
"The trend is your friend until the end when it bends."
—Ed Seykota
"Markets can remain irrational longer than you can remain solvent."
—John Maynard Keynes
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Losers average losers is a blunt rule.
Imagine you buy a stock at 100. The price drops to 90--a great time to buy more. It falls to 80. Then 70. No, wrong.
Yet, many keep averaging down, buying more, hoping the market will turn in their favor. They refuse to admit they're wrong. They're digging a deeper hole.
This is the opposite of trend following. If the price is flowing against you, get out. Don't fight the trend. Don't hold onto hope when reality screams at you.
Paul Tudor Jones makes it clear. The sign hangs behind him.
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