Quote from N54_Fan:
Look at these statements you make! You do not put much credence in stats yet you THINK your volatility is related to certain ways you trade. If you have stats you could analyze it and know for sure. If you "suspect" you win rate is less than 50% then how can you make a decision on risk per trade? Do you have any idea what the risk is of a 30% drawdown is in your system?...50% draw down?...100% draw down? You do not because you dont keep stats. So now you WONDER whether this is just you being numb to the numbers as if you are in the zone or something rather than being naive about the potential disaster you have on your hands.
My vote is disaster waiting to happen!!
IF you had stats about your system and KNEW with good confidence that the way you trade would result in certain draw downs and that in the end you will be fine and clearly profitable THEN I would say its best to be numb to the numbers... IF that were true you would have PROVEN to yourself that your system would perform in th elong run and not just in certain markets. That way when a string of bad trades come you can sit back and relax KNOWING you will ultimately be fine.
Not trying to bash you but seem to be risking too much for a system that has <50% in rate and certainly with NO stats.
In my defense, let me just say that I've never believed in statistics, backtesting etc in finding an edge in the markets, so I apply that to my own performance. Statistics are the equivalent of looking at a chart -- it tells you where something has been but gives little clue as to where something may be going. I don't care whether a market or stock or trade has only a 1% chance of doing this or that -- I'm more betting on everyone else believing that instead, and trading accordingly.
For me, risk management has always been determined by amount of capital available (in my situation, beyond the token "initial deposit", this usually means profits MTD) and the risk parameters of the security and situation in question. That's all. To be fair, I do have a built-in loss "brake" via the firm I trade with. But I believe I don't really need to know exact figures beyond what's working well and what isn't, to keep moving towards the former and away from the latter. I've actually done about half a year's worth of detailed stats on Access, categorizing trades by methodology, industry, volatility, duration etc, and the numbers pretty much came out as I how I "remembered". But statistics are a poor indicator when it comes to learning new setups, of course when you start out the numbers will be ugly but if you continue to learn you will be already ahead of what past figures can tell you.
I am well aware I have a risk tolerance far higher than most traders, and given my history, I can give back a majority of my gains at any given time. That's always been my weakness, yet I maintain my confidence because I know I can make it back. It's the only way you can make and give back a month's/year's worth of gains in the space of a day/week, dust yourself off, and keep plugging. I suppose my confidence comes mostly from the fact that if I really didn't know what I was doing, I would have been out of the game a while ago. I am comfortable risking everything -- well, because I already have.
Ok with all that being said, I am taking your caveats to heart. I am sure if I did dig down deep and did the work to find exactly what my greatest strengths and weaknesses are, my numbers would be much more consistent, if not even nominally higher. But I admit I am lazy, and not a numbers guy. I fear I have ulterior motives for trading that unfortunately have nothing to do with the numbers, that apparently surface almost every session. I think the fear of pinpointing exactly what my strengths are stems from the fact that I don't believe any edge lasts forever, you've got to keep developing and adapting, statistics and pigeonholing be damned.
Sorry if I'm rambling, I post this mostly to focus my thinking on the subject, and alot of times on ET I come to my own conclusions typing responses to my original question. I was also more curious as how others have dealt with the same situation as they grow as traders. You do have a valid point and it's up to me whether I can learn from it (unfortunately, it seems I usually never learn anything new unless I lose/pay for it first heh).
