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
J_Smith said:
The answer to that is easy - most do not have a clue what they are doing!

The majority waste endless hours and endless money - I know as I was also once a fool ! - in search of certainty in an uncertain endeavor!

If you are in..and you are up..and it stalls..then why should you stay in..as it has stopped moving the way you want it to move!

How much does a measly commission cost compared to what you can lose on a trade!

It makes one laugh when you hear people talk about saving a few $ on commissions, and then they sit back and watch their p&l go into the red to the tune of $50..then 100..then 150...then 200...and then they panic and get out!

What happens next !!!!!

If someone wants to make money trading, then the first thing they have to do is know what their max risk per trade is, and stick to it (can be less..but never more) no matter what - NO MATTER WHAT!

If this is not possible, then best to quit and give the money to your kids, charity, or just blow it on booze and women if you are single, for at least you can say you had a good time :)

J_S
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Amen and amen except to last sentence!
 
J_Smith said:
This is where I have to disagree!

My argument is as follows:

Bad timing is bad trading - you lose as soon, or very shortly, after placing a trade.

Good timing is good trading - you win as soon, or very shortly, after placing a trade.

In my books, CORRECT timing is everything!

For every trade you place, you should have the following worked out, otherwise you are just guessing!

1. $ risk - giving you the no. of shares or contracts to trade

2. Entry level

3. Exit level - Stop Loss

4. Exit level - Profit Target

All above are SET before you pull the trigger!

If your Profit Target is hit - take it!

Why take the risk!

You can say to use trail stop - but in volatile markets you can get gaps and give back more than you should have!

Of course, what is not mentioned here are the levels themselves, for, depending on the trader and how market is traded, the levels could be way different - so, it is all relative to how much money you have, how much you know about the market you are trading, and how good you are at TIMING!

J_S
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Yes, Yes! Yes! Yes! Timing will let you know VERY soon if you are right OR wrong. Hope will keep you in a loser. Greed will keep you in a winner that soon becomes a loser. Bite the bullet. Take the loss. Bite the bullet take the winner. If you have a sound mathematical basis for entry..risk..exit..profit target..win rate..stop loss..average win..average loss..then math, which is relentless, will ALWAYS be on your side. You then only have to have the timing right and have discipline and some $$ to trade with. Timing will very very soon manifest itself as right or wrong. I define discipline as being responsible (regardless of how you feel) to do WHAT you are supposed to do, WHEN you are supposed to do it, and HOW you are supposed to do it and pay ATTENTION to detail.
 
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This whole thread has turned into a pile of horseshit. Great success (hedge funds, algo shops, independents) in this industry revolves around the ability to separate signal from noise, which means timing and entry. Many ways to do it, but not easy to do. After that, a risk management scheme could be structured by a sixth grader. That's the easy part.
 
Buy1Sell2 said:
Re-posting of original posting for you, the new reader:


This is a fact. In order to be successful in trading, it doesn't matter whether you are right or wrong when placing a trade. What does matter is that when you are wrong, you lose a little bit and when you are right, you maximize your gains. Why do most traders (especially day traders) lose? They don't have prudent risk management skills. End of Story. Now, a lot of folks may say, "but the newbie trader doesn't know how to pick entries and exits". While that may be true for some, the real issue is that when they are wrong, they stay married to a position, or add to a position in order to not admit failure. Your best bet would be to learn to embrace failure, learn to shrug it off, learn to admit when wrong and learn to stay in trades that are winners. You see, Prudent Risk Management is not just about placing an initial stop---it's also about managing a winning trade. Remove the focus from high winning percentage. Retrain focus on losing a little and making a lot.
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Successful trading is 95% this^.
 
Believe whatever you like guys. We're just talking with >12 years experience each. Hbu?

btw, most hedge funds are just mathematicians, statisticians and programmers, anyway.
 
Prudent risk management is the ONLY TRUE EDGE? How many of you that actually believe this, can make a living trading random entries...or believe you could make a living with random entries if you had to? If you don't...why not? Why do you use charts, indicators, math...etc. Please don't say "to find that extra edge", because it appears that believers of this concept don't need an extra edge...they've already got all the edge they need...prudent risk management...right!!!!! Why do you need anything else?
 
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