Prudent Risk Management Is The Only True Edge In TRADING

[syniczfx]

The edge is being able to manage your trades. 2 people both using the same analysis for markets will have drastically different results if one trader employs PRM and the other does not.

Wrong.
The edge is to identify and enter into the winning trades. PRM is simply a function of reducing your losses and maximising your gains. But if your analysis or strategy is poor, no amount of PRM can give you gains. It might help prevent you from blowing up. But it will certainly not give you profits.

You can "manage" your trades. But a losing trade is a losing trade. The "edge" is to identify more/bigger winning trades. And PRM does not identify trades for you.

Another way to think about it. If PRM is indeed an edge. Then you could literally enter the market at random and PRM your way to profits.

 

[BONECRUSHER]

Correct. PRM will prevent you from blowing out your account totally because you will have to stop trading before the blowout----But detractors always mention an absurd example of somebody losing on every single trade.--In reality, what happens is everyone has a positive winning percentage but most traders take profits early and take losses late. So, they are unable to overcome their inevitable losses.

Buy1Sell2...do you enter the market randomly? If not, why not? Why bother entering any other way...it would just be a hassle to do otherwise? If you don't enter randomly, wouldn't that imply you believe there's a better way to enter than pure randomness? If you don't enter randomly then all of your PRM preaching has been pure B.S...don't you think?

 

[Buy1Sell2]

Buy1Sell2...do you enter the market randomly? If not, why not? Why bother entering any other way...it would just be a hassle to do otherwise? If you don't enter randomly, wouldn't that imply you believe there's a better way to enter than pure randomness? If you don't enter randomly then all of your PRM preaching has been pure B.S...don't you think?

Everyone find good entries. There is no edge in that. It is what you do with those entries that sets a trader apart. Trading is only about one thing and that is how you manage risk.

 

[syniczfx]

Everyone find good entries. There is no edge in that. It is what you do with those entries that sets a trader apart. Trading is only about one thing and that is how you manage risk.

Not everyone can find good entries. That is where the edge is in.

 

[Buy1Sell2]

There is an entire cottage industry running to teach people how to enter properly. In reality, the only books that should be written are on risk management. The reasons traders fail is that they do not employ PRM. --Yes--it's just that simple. --Observe PRM and you have the edge in this industry.

 

[syniczfx]

There is an entire cottage industry running to teach people how to enter properly. In reality, the only books that should be written are on risk management. The reasons traders fail is that they do not employ PRM. --Yes--it's just that simple. --Observe PRM and you have the edge in this industry.

You are making a false and unproven statement. Prove it.

 

[Buy1Sell2]

Paul Tudor Jones----

Pay special attention to 5,6 ,7

1. "Don't average losers."
   
   
2. "Decrease your trading volume when you are trading poorly; increase your volume when you are trading well."
   
   
3. "Never trade in situations where you don't have control." Jones elaborated that he doesn't "risk significant amounts of money in front of key reports, since that is gambling, not trading."
   
   
4. "If you have a losing position that is making you uncomfortable, the solution is very simple: Get out, because you can always get back in."
   
   
5. " Don't be too concerned about where you got into a position."
   
   
6. "Play great defense, not great offense. Every day I assume every position I have is wrong."
   
   
7. Stay humble. "If you make a good trade, don't think it is because you have some uncanny foresight."

 

[syniczfx]

Paul Tudor Jones----

Pay special attention to 5,6 ,7

1. 
   
   
   • "Don't average losers."
   • "Decrease your trading volume when you are trading poorly; increase your volume when you are trading well."
   • "Never trade in situations where you don't have control." Jones elaborated that he doesn't "risk significant amounts of money in front of key reports, since that is gambling, not trading."
   • "If you have a losing position that is making you uncomfortable, the solution is very simple: Get out, because you can always get back in."
   • " Don't be too concerned about where you got into a position."
   • "Play great defense, not great offense. Every day I assume every position I have is wrong."
   • Stay humble. "If you make a good trade, don't think it is because you have some uncanny foresight."

1. Those are simply quotes and not evidence of edge.

2. There is no reference in those quotes that PRM delivers an edge.

3. Whatever PTJ said are advice for traders. Those advice do not gurantee an edge.

4. I think you need to open yourself up abit here.

 

[Buy1Sell2]

1. Those are simply quotes and not evidence of edge.

2. There is no reference in those quotes that PRM delivers an edge.

3. Whatever PTJ said are advice for traders. Those advice do not gurantee an edge.

4. I think you need to open yourself up abit here.

Your position is indefensible. You are now arguing against obvious truths. I understand it is difficult for folks to grasp something so simple when they have spent long hours studying and backtesting etc to come up with a plan. It's hard to let go of. But at the core of trading it is all about "What do I lose, What do I gain?"----There is nothing simpler that successful trading once you realize this.

 

[Pekelo]

Another incredible big stupidity of the "PRM theory" is this:

It doesn't talk about the winners. It doesn't tell you anything when to exit winning trades. So let's just say for the sake of argument it does control the down side,(it does not by the way) but if the upside exits are random, it could be still just a break even strategy or very mildly profitable, because a hard stop loss at 2% doesn't make a strategy!!