You're mistaken. Or maybe you care to take a stab at what risk is to clarify matters beyond semantics.
Elite Trader School
- Thread starter longandshort
- Start date
Sure. Why not?
What I find a lot of times is that people start debating terms that can mean different things to different people. Rarely is a thread, or a topic within a thread, started with a definition--to insure everyone is talking about the same thing.
To answer your question, I'll look to a standard definition. From Investopedia:
but your plan has a stop loss or expected loss if you are wrong, Right? If so, That’s your risk.
your plan must have some modicum of an idea as to what you could earn, right? That would be your expected return.
You might use different terms but I would be surprised that a long term successful trader as yourself doesn’t have a risk management methodology that’s too far different in concept than other long term successful traders.
And like I previously said to L&S I asked you what is risk. If was asking for a standard one size fits all version which happens to be wrong anyway I already knew where and how to find it.
Example to clarify risk.
Skydiving is considered "risky" depending on the person. Most would think the risk is of dying. No that is the possible end result. The risk is the chute not opening properly or maybe the plane crashing, pilot having a heart attack or some other odd mishap. That is the risk.
Similarly with trading the risk in a trade is not losing money, even if that is the eventual outcome. Risk is the trade going against you, or a black swan event showing up, or gaping above/below your stop, or internet broker connection going down and cellphone service at the same time, etc.
So Risk = X which causes Y but that doesn't mean Risk = Y if you now know what I mean.
If not difference of opinion notwithstanding Investonewbie
Of course I use stops - all the time - every time - set in advance - only moved/adjusted in my favor. Always allowed to do their work. Always.
They protect me from having a bigger loss than my parameters allow or of allowing too much current profit slip away. The risk of either happening. Not the risk of losing a certain amount of dollars.
At one time I found it hard to grasp this key concept and thought of it as just word play. It is not - for me at least.
that stop is your risk.
I believe I understand what you're saying; but just to be clear, you must necessarily disagree with the industry standard definition of the word 'risk;' as I previously quoted.
Is that correct?
While I await your response, I'll say this to the room:
It doesn't make sense to me, to usurp an established word, that has been utilized for centuries, and properly defined, and apply one's own personal definition to it.
If we all could just willy-nilly decide to use established words, in some different way, there would be chaos--as has been illustrated in discussion forums all over the internet.
Rather than commandeer long establish, actual words; establish a new phrase/word. It would be a term of art that you created. Maybe it would catch on.
Risk has already been defined. None of us get to say, "that's the wrong definition! Here's the new definition that I've created!"
There's risk, period.
What @SunTrader describes sounds like the financial equivalent to the medical phrase: "risk factors."
Perhaps use that phrase instead of colliding with a well-established word.
Semantics.
It doesn't make sense to me, to usurp an established word, that has been utilized for centuries, and properly defined, and apply one's own personal definition to it.
If we all could just willy-nilly decide to use established words, in some different way, there would be chaos--as has been illustrated in discussion forums all over the internet.
Rather than commandeer long establish, actual words; establish a new phrase/word. It would be a term of art that you created. Maybe it would catch on.
Risk has already been defined. None of us get to say, "that's the wrong definition! Here's the new definition that I've created!"
There's risk, period.
What @SunTrader describes sounds like the financial equivalent to the medical phrase: "risk factors."
Perhaps use that phrase instead of colliding with a well-established word.
Semantics.