For a period of time, I was teaching myself how to make a good linguine Aglio E Olio.
As a fan of both stoic philosophy and pasta, I am constantly amazed at how such a simple dish can be so delicious. If I had to choose only one thing to eat for the rest of my life, this would probably be it.
But as you know, just because something is simple, doesn’t mean it’s easy to do.
Since there are few ingredients involved (olive oil, garlic, chilli, salt, pepper, herbs), the manner in which the dish is prepared is crucial.
If the pasta is cooked for even a minute too long, it becomes too soft. If the garlic is cooked at too high a temperature, it quickly turns black and tastes bitter.
In particular, I found that I often screwed up by adding too much salt. For some reason, I had the tendency to overestimate the amount needed.
And since cooking was a form of leisure, and I didn’t want to spend time measuring the exact amount of salt to be using each time. I wanted to do it by “feel”.
The problem was, my “feel” for cooking was terrible.
A Lesson From Mom
One day, as I was preparing lunch over at my parents’ house, mom came into the kitchen and saw me deliberating over a jar of salt.
“Just add a little bit first,” she said.
“If you add too much right away, you can’t remove it later, and you’ll ruin the dish. If you use just a little salt first and later find that you need more, you can always add more then.”
She then walked over to the sink, washed her hands, and walked out of the kitchen, finally adding, “It’s better to make a mistake by adding too little, than by adding too much.”
I looked at her, stunned for a moment.
She was absolutely right.
With all the time I’ve spent thinking about trading philosophy, you’d think that I’d have already thought of this…
After all, the same principle applies to trading.
Test The Waters, Don’t Just Jump In
Every time I take a position in the market, I’ll first do so with a small token lot size.
This way, if I’m wrong, the situation can be easily (and cheaply) remedied.
If however, I enter on a full lot size right at the beginning and something goes wrong, it’ll be a lot more difficult (and expensive) to “save” the trade.
Unfortunately, this is exactly what many retail traders do. They enter a trade with the entire lot size straight up, and then proceed to set the stop loss 20-pips below it.
And when things go wrong, they end up taking the full loss.
Their operating philosophy is: “I know where the market is going to move after my entry”.
Well… their trading results will be the judge of that.
Entering The Market With A Token Lot Size
By first entering the market with a small lot size, you take the pressure off having to be right, right off the bat.
If the market price goes against you, you can step back and re-analyze the situation. You then have the option to add on to your position at a better (average) price, or to alter your view of the market.
Compare this to a situation where you’ve taken a full position right away. If prices move against you, you’re stuck with the trade with no other options than to wait, or close the trade immediately for a loss.
And what if the market price goes in your favor?
Well then, in the wise words of mom, “you can always add more then”.