Fear of the Swan

[hedron]

I'm just wondering how people manage their trading knowing that at some point a black swan event will occur. I'm thinking something along the lines of:

1) Live in a constant state of fear and trade as if a black swan event could occur at any moment.

2) Never give it a thought, since it would be impossible to predict anyway. And when/if it does occur you'll be screwed but there was nothing you could do about it anyway.

I was trying to think of some sort of middle ground approach, but I just can't think of one between total paranoia and total indifference. I personally think the latter is a better attitude, since you'd never be able to take a trade embracing the former.

 

[xandman]

You have to know the range of possibilities that can occur with your strategies.

Don't ever put yourself in a position where a big loss could make you destitute or affect your family's lifestyle.

If my account blew up tomorrow, I would still be equally poor. After that, it's all just performance numbers. Dollars are just my Government's currency.

 

[ktm]

Somewhere between the two.

Respect the swan, be mindful of the fact that the swan lurks...but don't let it own you.

 

[pak]

If your constantly thinking that you may one day get caught in a Black Swan...then learn to ONLY trade options from the LONG side...then you will ALWAYS know your worst case scenario in a disaster!!!

 

[Redneck]

Somewhere between the two.

Respect the swan, be mindful of the fact that the swan lurks...but don't let it own you.

And have contingency plans

Swans come in a multitude of forms


RN

 

[hedron]

Swans come in a multitude of forms

Yea, I was kind of thinking that getting stopped out is a sort of mini-black swan. Because there's no reason to take a trade that isn't profitable. So, getting stopped out is something you didn't expect to happen.

 

[Redneck]

Yea, I was kind of thinking that getting stopped out is a sort of mini-black swan.

Getting stopped out is a normal part of trading..., and no where near a swan event

Not even in the same universe

Because there's no reason to take a trade that isn't profitable.

This is simply crazy thinking

Like you.., I.., or anyone - will ever know before hand - never happen

So, getting stopped out is something you didn't expect to happen.

Nor is expecting a trade turning out profitable

=======================

You ever experience a black swan event - whether you survive it..., or not - you'll have no doubt it a black swan


RN

 

[hedron]

This is simply crazy thinking

Like you.., I.., or anyone - will ever know before hand - never happen

I understand the uncertainty part, I just don't know why you would take a trade knowing it was going to be a loser.

 

[JTrades]

Yea, I was kind of thinking that getting stopped out is a sort of mini-black swan.

And a light breeze is a sort of mini hurricane.