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
If you do not have an advantage (edge) then prudent risk management dictates that your bet size is zero. In other words, find another thing to do in life.

You being a zebra could, for example, teach other zebras the art of hunting and eating crocodiles. I'm sure there is an audience, ready, willing and able, to listen.
 
This thread will break all records, it is just a matter if time: most postings and most views.

From start the votes gave 75% of NO's but the posting keep coming in. This must be one of the most useless threads ever on ET. Utterly stupid thread.
 
digitalnomad said:
This is a fallacy. If we truly knew highs/lows then achieving high win rates without using stops could easily be executed.
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The guy you responding to is correct. The aim is to always buy low and sell high, the rest is taken care of by PRM. You can mostly achieve a consistently high win rate when your targets are small anyway, the more pips you gun for the lower the win rate will be. The objective is to learn how to manage losses and gains in relation to your capitalisation. Win rate isn't a primary concern, it only becomes one to traders with low capitalisation, a lot of the time below advisable minimums.

If you were to speak to traders that used to trade on the floor they would tell you - objective is to aim to buy low & sell high. By buying low you are not to assume buying absolute lows and vice versa, but consider rejoining bigger trends, not look for overall trend changes.

I happen to know a trader that has massive stops in relation to targets, his stop is the absolute floor valuation of an index where's a target could be 1% in relation, he does rather well bottom fishing and is consistent beyond anyone's wildest imagination.
 
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JSSPMK said:
I happen to know a trader that has massive stops in relation to targets, his stop is the absolute floor valuation of an index where's a target could be 1% in relation, he does rather well bottom fishing and is consistent beyond anyone's wildest imagination.
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Until he gets hit by that one that just doesn't come back. High win consistently doesn't necessarily mean positive expectancy in the long run. If he's doing this type of thing regularly he better keep his position size strictly under control.
 
i960 said:
Until he gets hit by that one that just doesn't come back. High win consistently doesn't necessarily mean positive expectancy in the long run. If he's doing this type of thing regularly he better keep his position size strictly under control.
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Worst case scenario his cash could get tied up for a long time and lose % of value due to inflation, yet it still beats losing it to other traders, no?
 
JSSPMK said:
Worst case scenario his cash could get tied up for a long time and lose % of value due to inflation, yet it still beats losing it to other traders, no?
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No that doesn't beat "losing it to other traders" - the money is already lost. Look, consider any trade as pretty much being marked to market daily. That money is no longer there - and opportunity cost of capital has been realized, i.e. it's no longer capital that can be deployed elsewhere for more productive purposes.
 
Well, but then it is just a matter of how much capital you have and how much you use for a single trade. If I get stuck in a trade for a few days, even weeks, it is not a big deal, I can still trade with the rest of my capital and wait for the trade to come back.

I know that is not what is advised by trading gurus and probably I could find a way to use stops but it works better this way for me. Sure, once in a while (maybe once or twice a year) I might have to get out with a significant loss, like a couple of weeks of gains, but who cares? it works for me and and especially my P/L and my win rate which is pretty high
 
i960 said:
No that doesn't beat "losing it to other traders" - the money is already lost. Look, consider any trade as pretty much being marked to market daily. That money is no longer there - and opportunity cost of capital has been realized, i.e. it's no longer capital that can be deployed elsewhere for more productive purposes.
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I meant losing all of your capital, in which case you are wrong. Lost opportunities does not equate to losing your funds.
 
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