Prudent Risk Management Is The Only True Edge In TRADING

Is Prudent Risk Management the only true edge in trading?

  • Yes

    Votes: 53 29.9%

  • No

    Votes: 124 70.1%
  • Total voters
    177
deaddog said:
Buy1Sell2 feels that he has to keep his edge under his hat. I'm not sure how widespread knowledge of a prudent risk management system would affect the market but I won't be getting any specifics from him.

Given the same scenario. A short of 100 SPY at 10:00 EST on Monday with a 25K account size where would you place your exits.

Can you be more specific than "slightly above", "Price action dictates stop loss" & "Variance zone"? Why a 2 hr Chart?

This is not intra day trading. I use EOD data. I can place stops that will stay in place all day but don't have time to monitor the market.

I believe that prudent risk management is an integral part of an Edge but have my doubts that it can lead to success with random entries. I am more than willing to be proved wrong.
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What you will find is that a trader with a 25k account size assuming that is their TLNW can only stand to lose 500 dollars on the first trade. If the stop necessary to be outside the noise is more than 9.5 pts away, then the trader cannot take the trade. (assuming 1 contract ES). That trader more likely needs to be trading on a 1 minute chart , 5 minute chart or perhaps 15 minute chart, but realistically not trading at all and just investing.
 
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long 100 spy at 190.0,...stop 186.0... stop loss value is 400 dollars.. take profit is either 194 or 198.

25,000 equity/400 = 62.5

100 spy costs 19,000 to keep trading fixed 100 spy.. 25,000-19,000 = 6000
6000 / 400 = 15

so essentially you can only trade 15 times before you need to reduce amount of shares.

if you had 10 consecutive losses, 4000, but let your winners ride for 5 trades, letting your winners ride implies, more than the 400 dollar stop, the setup would need to yield 4 times the stop loss..or 1600, 1600 x 5 = 8000. You would be at 29,000 equity.

if take profit is only 3 times stop loss.. 1200 x 5 = 6000, you would be at 27,000
if take profit is only 2 times stop loss.. 800 x 5 = 4000, you break even.

so you need to filter the setups where profit potential is 2-3 times stop loss..
 
deaddog said:
I believe that prudent risk management is an integral part of an Edge but have my doubts that it can lead to success with random entries. I am more than willing to be proved wrong.
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Stick with your assessment. Any idiot can enter randomly and place stops outside the noise. I wish it was that easy. You will slowly get pounded in the anus, and hopefully learn something along the way. What B1S2 is advocating is a learning process, and not a successful approach. I still doubt he actually trades
 
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profitlocker said:
Stick with your assessment. Any idiot can enter randomly and place stops outside the noise. I wish it was that easy. You will slowly get pounded in the anus, and hopefully learn something along the way. What B1S2 is advocating is a learning process, and not a successful approach. I still doubt he actually trades
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Not a learning process at all. What is worth learning is the value of risk management. You've already agreed with my tenet in toto.
 
deaddog said:
But that is no longer a random entry. :)
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He is only stating a risk management principle that conforms to the idea of cutting losses and letting winners run. He is stating that you would not stay in trades beyond a specific loss percentage. He lists 2 to 3% --that can be fine if it related to account size, but 3% is too high when compared with TLNW.
 
I contributed a posting earlier today where I indicated that analysis using TLNW may show that a trade cannot be taken. This is some of the best advice you will ever receive. This is where the rubber meets the road.---risk management.
 
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