Knowledge and involvement: Preservation Of Capital
Even if you have identified your “Edge”, one shouldn’t forget is competing in the global financial markets against other participants which can move the markets significantly (Ex: Central Banks, Primary Dealers, hedge funds, pension funds).
Commonly, inexperienced traders adopt an aggressive stance, attracted by the “potential” reward such behavior allegedly provides. In these cases, remaining out of the market, or if you have the knowledge, aligning with these larger “entities” rather than challenging them, will improve the chances of achieving a truly exceptional consistency, which will then increase your talent in the effective implementation of your “trading tools”. It is also recommended to be very cautious with extreme volatility. A “neo-trader” who is trading on the basis of his identified “Edge” has his chances drastically reduced in times of high volatility.