Prudent Risk Management Is The Only True Edge In TRADING
- Thread starter Buy1Sell2
- Start date
The village called and would like him to come home.
It's too bad that the OP chose a really crappy title and a somewhat misplaced premise for the most under-appreciated and least well understood aspect of trading system strategy.
You take a trade entry, and one of two things are going to happen: you stop loss, or you hit your profit target. It seems like 99% of the effort goes into the trade entry machinations and the rest is an afterthought.
In my opinion, much of this "proper trade management trumps an entry edge" philosophy comes from the exploits and legends of a small number of certain skilled and well positioned pit traders. Especially around a market open, independent pit locals would get alot of orders thrown at them from floor brokers. If there was any balance to the market orders those locals just cleaned up. Being able to have immediate access to that order flow and having the situational awareness to find other orders to lean on meant that certain (privileged) floor locals could buy bids, sell offers, and get out stinkers with a scratch. For size.
Being one of those 1% of locals with access to that kind of order flow, the capitalization, and almost certainly the good graces (yeah, it was not a fair democratic process) of those floor brokers was into and unto itself a legitimate and powerful edge. Of course, those days are decades gone.
You do, of course, require a statistically valid entry edge. It doesn't need to be huge (and truthfully almost certainly your edge won't be more than a few to several percentage points above B/E - if your edge is legal) but if your W/L ratio is > 50% over a protracted period of time and through several market cycles then that is all that is required - provided you have proper trade management rules that you do not sabotage.
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The best systems traders I've seen over the years have incredible discipline devoid of emotion. They're automatons in practice. And they have set both profit targets and stop-loss at the time of trade entry. That is a fact.
And that's not an opinion. I have seen it time and time again - to me it's not a judgement or viewpoint it is indeed established fact.
And that's not an opinion. I have seen it time and time again - to me it's not a judgement or viewpoint it is indeed established fact.
Great points - Once I had a profit target and an exit entered with a bracket order trading got a lot easier. My trading took of and stayed that way when risk mgmt became my priority. Simply put it is rigging my trading to remove as much dumb from it as possible by following a set of rules. Novice traders try to figure out the market will do next, when they don't even know what they will do next.
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Adding to the complexity, some use discretion/ moving profit target[ set slightly before time of entry]. NOT saying anyone else should add to the complexity or post about ''only true edge'' unquote.LOL
Pretty thin silver coin with only'' one'' sideThe edge you've "handed out" to everyone is about the same as telling everyone to "buy low and sell high" as the only TRUE EDGE!
%%The edge you've "handed out" to everyone is about the same as telling everyone to "buy low and sell high" as the only TRUE EDGE!
That may work some LOL; but IBD made a fortune on buy hi + sell higher+ lots of work
Easy to get fooled in market these yellow triangles mean caution !!