How simple are professional trader's strategies?

[beerntrading]

Yeah maybe... but at least you're trying to make decent money this way... more than just buy-and-hold...? Or are you just playing around

Buy and hold is by far the larger portion of my holdings. But my points here are specific to credit spreads.

Right now I'm going live with my well tested weekly options strategy (I tested with real money, but small positions). It will be nearly a year to build position sizes up to fully deploy the account capital because of the necessity of keeping risk relatively level from one week to the next.

 

[ironchef]

For most people, the risk management is secondary to alpha generation - if you do not have alpha, you can't generate revenue no matter how well you manage risk.

 

[ironchef]

Buy and hold is by far the larger portion of my holdings.

Buy and hold by definition means no risk management. So, why are you doing it if you think risk management is so important?

 

[beerntrading]

Buy and hold by definition means no risk management. So, why are you doing it if you think risk management is so important?

...one sentence further.

Buy and hold is by far the larger portion of my holdings. But my points here are specific to credit spreads.

 

[Vertex]

Sadly, you don't have a grasp on what Prudent Risk Management is.

I don't know about the person you responded to, but I probably don't know what Prudent Risk Management is. If you are willing to lay it out i would be interested.

When you say it is the only edge in retail trading, do you mean that you use only risk management to select entries? Or do you have some analysis that you apply to the market, then run it through your risk management before entering a trade?

 

[ironchef]

...one sentence further.

Does that mean you do not need any trading methodology to make money trading credit spread: Random entry will be profitable as long as you do risk management? And in that case, what is your definition of risk management?

I am trying to understand risk management so bear with me please.

Regards,

 

[JackRab]

Does that mean you do not need any trading methodology to make money trading credit spread: Random entry will be profitable as long as you do risk management? And in that case, what is your definition of risk management?

I am trying to understand risk management so bear with me please.

Regards,

Exactly what I was trying to get at...

I think buy1sell2 is doing that... "the coin-flip trade..."

 

[ironchef]

Exactly what I was trying to get at...

I think buy1sell2 is doing that... "the coin-flip trade..."

I am not trying to choose sides in this debate, just want to gain some additional knowhow to improve my trading.

If risk management is the only edge and can turn random trades into profits, I really like to lean how to do that.

What is profitable risk management trading?

Best regards,

 

[JackRab]

I am not trying to choose sides in this debate, just want to gain some additional knowhow to improve my trading.

If risk management is the only edge and can turn random trades into profits, I really like to lean how to do that.

What is profitable risk management trading?

Best regards,

The only way a 50:50 'bet' in direction would work is if your risk management is keeping a tight lid on the loss, so a tight stop loss and letting profits run by more than stoploss + roundtrip fees x2. That's why I don't see risk management as an edge.. but a necessity.

The edge is when you get to skew the bet to above 50% win and under 50% loss.

Or, if you're capable of identifying a large move big enough to outweigh the multiple small losses. In which case you have under 50% win and over 50% loss, but the profit outweighs the loss.

In both cases, your strategy is to have the ability to skew the odds... which we all aim to do. The mere gambling effect of the 50:50 bet without having an idea about the size of the subsequent move is just that, a gamble and in the end statistically can't turn profitable.

 

[ironchef]

The only way a 50:50 'bet' in direction would work is if your risk management is keeping a tight lid on the loss, so a tight stop loss and letting profits run by more than stoploss + roundtrip fees x2. That's why I don't see risk management as an edge.. but a necessity.

The edge is when you get to skew the bet to above 50% win and under 50% loss.

Or, if you're capable of identifying a large move big enough to outweigh the multiple small losses. In which case you have under 50% win and over 50% loss, but the profit outweighs the loss.

In both cases, your strategy is to have the ability to skew the odds... which we all aim to do. The mere gambling effect of the 50:50 bet without having an idea about the size of the subsequent move is just that, a gamble and in the end statistically can't turn profitable.

Thank you for taking the time to answer. You give me something to think about.

Regards,