The First Rule Is Survival

One of the biggest investing lessons I learned did not come from a textbook.

It came from almost blowing up a trading account.

When I started trading seriously, I was obsessed with growth.

Like many traders, I set daily profit targets, 2%/day!!! . I wanted consistency. I wanted momentum. Most importantly, I wanted to maintain a winning streak.

At first, the results looked great.

Then I started increasing position sizes.

Not because the opportunity was exceptional.

But because I wanted to protect the feeling of success.

When a position moved against me, I sometimes averaged down. The logic felt reasonable at the time. If the market came back, the loss would disappear and the winning streak would continue.

Eventually, the account suffered a drawdown close to 80%.

That experience changed the way I think about capital forever.

Growth Can Be Dangerous

Most investors assume the biggest risk comes from losses.

I disagree.

The biggest risk often comes from success.

Success creates confidence.

Confidence creates larger positions.

Larger positions create fragility.

Many traders blow up shortly after their best periods, not their worst ones.

The market rewards them just enough to encourage behavior that eventually becomes destructive.

The Same Lesson Applies Outside Trading

I have seen a similar pattern in corporate finance.

As a CFO, I rarely worry about businesses growing too slowly.

I worry about businesses growing too aggressively.

A company can survive a missed opportunity.

A company may not survive a decision that commits too much capital to a single project.

This is something I think about frequently when evaluating large projects.

Survival comes first.

Why Survival Matters

Markets provide endless opportunities.

Capital does not.

If you lose 80% of your account, your next challenge is no longer making money.

Your next challenge is survival.

Every large drawdown reduces flexibility.

Every large drawdown reduces future opportunities.

Every large drawdown increases the pressure to make perfect decisions.

That is why professional investors spend so much time thinking about risk.

Not because they fear opportunity.

Because they understand that opportunity only matters if you are still around to take it.

The Shift

Today, I think differently.

I no longer ask:

How much can I make?

I ask:

How much can I lose?

I no longer focus on protecting winning streaks.

I focus on protecting capital.

Because the market always gives another opportunity.

Capital does not always give a second chance.

Final Thought

Looking back, the biggest mistake was not a bad trade.

The biggest mistake was prioritizing growth over survival.

The same mistake destroys trading accounts, investment portfolios, and businesses.

The first rule is not making money.

The first rule is survival.

Everything else comes after that.

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Continue Reading

• Why Most Traders Lose Money
• Position Sizing Before Strategy
• What Poker Taught Me About Investing

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