Yes, and typically the only way to get that kind of reward/risk ratio is a buy low/sell high type of strategy. However low and high are only relative, not absolute, except for zero. That's why trading (whether financial instruments or real assets) is the easiest and yet the hardest way to make money there is.
Prudent Risk Management Is The Only True Edge In TRADING
- Thread starter Buy1Sell2
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Yes, and typically the only way to get that kind of reward/risk ratio is a buy low/sell high type of strategy. However low and high are only relative, not absolute, except for zero. That's why trading (whether financial instruments or real assets) is the easiest and yet the hardest way to make money there is.
Yes, however low and high are easily found.
What is the average ratio of consecutive wins to losses?..
Would these rules be considered prudent risk management for a random entry?
Rules for random Long entry: (Reverse for short)
Max risk is 2% of trading capital. With a 25K account max risk will be $500 per trade. Attach a stop loss order to your initial long order.
Close position at end of day if position shows a loss. (Don’t carry losing position overnight.)
Trail a stop 25 cents under the low of the previous day until exit is hit.
Repeat.
Rules for random Long entry: (Reverse for short)
Max risk is 2% of trading capital. With a 25K account max risk will be $500 per trade. Attach a stop loss order to your initial long order.
Close position at end of day if position shows a loss. (Don’t carry losing position overnight.)
Trail a stop 25 cents under the low of the previous day until exit is hit.
Repeat.
In your example, I don't see what the TLNW is. Also, what is the significance of the previous days low? Might be significant, but just to generalize would not be prudent. I think the rule about not carrying a loss overnight may be overly prudent. If the trade make sense and is in the direction of the trend, you will likely want to keep it. Yes, I know that things can happen overnight but that is where you need to compare the risk with your TLNW. If it's just 25K, you probably need to just daytrade with very tight stops, or just invest and not trade.
And that's the uncertainty point. There is no possible way to ensure that only 2-3% of your TLNW max will be risked with overnight trades. That's exactly why I trade intraday. Less profit, better risk control, and great sleep. My worse nightmare would be a trading halt on multiple open long positions. Rare but can happen
That is why when trading overnight positions you are not using 10 times margin on account size as one would in the intraday. Outraday trading must be played with less risk. This is why an individual with 25k TLNW likely needs to buy and hold or trade intraday with very tight stops. There would be no reason to trade intraday unless using high margin and tight stops.
Just to further the point--If someone is losing sleep over a trade, then they are necessarily wildly overextended. You're not but there are those that are.
I've been able to get it up 20 consecutive wins.. There is no risk management in this trade except discretionary exits. Look at DD on one of them. But combine this win ratio of 100% with objective risk management, what do you have?
