Many people talk about “attaining enlightenment” every day, but what they’ve realized isn’t some profound technique, some magical indicator, or some exclusive trading method—it’s risk management.

I’ve seen too many people overestimate their ability to hold losing positions. They think a little loss in their account doesn’t matter and that they can always make it back by going all in with a large position. I’ve asked plenty of friends, and they say they can handle drawdowns of 5%, 10%, or even 15% and earn it back. But from a psychological perspective, once people hit a 15% drawdown, their mindset collapses. Most likely, they’ll do one of just three things:

1. Go all in with a large position, hoping to make it all back in one shot.

2. Start trading at high frequency. The more they lose, the more they want to trade, and the more they trade, the more they lose.

3. Add to their position against the trend. When they’re wrong, they delay or cancel their stop-loss and stubbornly look for the next support level.
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The point isn’t that you need to “overcome” these problems or meditate your way into overcoming human nature. It’s to make sure you never reach a 15% drawdown in the first place. Once people get to that point, they simply can’t control themselves.

Many retail traders spend every day studying technical indicators, thinking that losing streaks must be followed by winning streaks, and winning streaks by losing streaks. That logic isn’t wrong, but first you have to keep your losing streak within a 15% drawdown. Even if your trading system has a win rate of only 20%, you can still make money as long as you last until the winning streak.

Put simply, the first step toward “attaining enlightenment” in trading is not letting yourself reach the point where you lose control.
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