Prudent Risk Management Is The Only True Edge In TRADING

[Frederick Foresight]

We laughed at @Buy1Sell2 for saying Risk Management Is The Only True Edge. Now I understand what he was talking about, I need to reread his thread on risk management.

Good luck with that.

From what little I know, risk management is a necessary condition for survival rather than an edge. The question then becomes how asymmetrically you can play it. So risk management is just one variable in the equation. That hardly makes it the “Only True Edge.”

I think you’d be better served continuing with your laughter at B1S2’s expense.

 

[volpri]

Good luck with that.

From what little I know, risk management is a necessary condition for survival rather than an edge. The question then becomes how asymmetrically you can play it. So risk management is just one variable in the equation. That hardly makes it the “Only True Edge.”

I think you’d be better served continuing with your laughter.

Forgive me but very funny Freddy.

 

[ironchef]

Good luck with that.

From what little I know, risk management is a necessary condition for survival rather than an edge. The question then becomes how asymmetrically you can play it. So risk management is just one variable in the equation. That hardly makes it the “Only True Edge.”

I think you’d be better served continuing with your laughter at B1S2’s expense.

Forgive me but very funny Freddy.
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I am not quoting a nobody, the fellow who said it was the former head of global portfolio construction at Citadel. If you think you are smarter than him, more power to you sir.

His first order of business was to integrate risk management into the portfolio management process. That led to the introduction of a volatility target model, which enabled the firm to use risk management as an alpha-generation tool, rather than just as a defensive measure, he claims.

 

[ironchef]

Forgive me but very funny Freddy.
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Very funny.

 

[ironchef]

Did he go broke?

He retired to his super yacht mooring at Monte Carlo.

 

[Frederick Foresight]

I am not quoting a nobody, the fellow who said it was the former head of global portfolio construction at Citadel. If you think you are smarter than him, more power to you sir.

You missed the point. Sir.

 

[ironchef]

You missed the point. Sir.

Please run that by me one more time. What was the point you were trying to make?

Is it this:

That hardly makes it the “Only True Edge.”

If so, yes, it is not the "Only True Edge", if not please explain.

My point was, everyone (me included) said risk management was not an edge. But someone was able to turn it into an edge and generated alpha. It was eye opening for me, I never thought risk management by itself could be solely used to make money trading.

Thanks.

 

[Frederick Foresight]

Please run that by me one more time. What was the point you were trying to make?

Is it this:



If so, yes, it is not the "Only True Edge", if not please explain.

My point was, everyone (me included) said risk management was not an edge. But someone was able to turn it into an edge and generated alpha. It was eye opening for me, I never thought risk management by itself could be solely used to make money trading.

Thanks.

As I understand what he said, I already answered your question the first time:

From what little I know, risk management is a necessary condition for survival rather than an edge. The question then becomes how asymmetrically you can play it. So risk management is just one variable in the equation. That hardly makes it the “Only True Edge.”

Think it through.

Unless, I'm wrong, of course.

But don't take my word for it.

"Is Prudent Risk Management the only true edge in trading?"

Jack Schwager, who interviewed about 5 dozen successful traders over a period of 25 years and wrote about it in his 4 Market Wizards books covering about 2,000 pages, wrote the following in The Little Book of Market Wizards:

There is a Wall Street adage that says, "Even a poor trading system could make money with good money management." Have you heard that saying before? Well, if you have, forget it, because it is really one of the stupidest things that has ever been said about trading.

Good money management is essential, of course, because without you don't have a chance. It is a requisite, not an edge.

 

[Zalak]

Unfortunately, it is not always possible to calculate all the risks and prevent them.

 

[Elly9]

Unfortunately, it is not always possible to calculate all the risks and prevent them.

But we can always reduce the possibilities if we estimate some degree of risks before.