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
ironchef said:
Buy1Sell2,

I used to think what you said was a bunch of BS.

But last night I re-ran a method I developed and something very interesting happened to my simulation: The backtest results all turned profitable when I tightened the stop losses but further tightening created losses again. So there is a nonlinear effect and I can fit a polynomial on the profit curves.

Perhaps you made a good point, by managing risks better, some methodology can create an edge? what I mean is the relationship between missing big winners and tightening losses are nonlinear or one to one. There maybe a sweat spot for every method on risk management vs gain.

Regards,
More...
Interesting posting. -and thank you for doing so. Tightening stops can certainly change a system from losing to winning as well as letting winners mature and position sizing etc. ---Managing risk is the only variable that we can control as traders so it makes sense that prudent management of same is the edge.---Ishmael.
 
ironchef said:
Buy1Sell2,

I used to think what you said was a bunch of BS.

But last night I re-ran a method I developed and something very interesting happened to my simulation: The backtest results all turned profitable when I tightened the stop losses but further tightening created losses again. So there is a nonlinear effect and I can fit a polynomial on the profit curves.

Perhaps you made a good point, by managing risks better, some methodology can create an edge? what I mean is the relationship between missing big winners and tightening losses are nonlinear or one to one. There maybe a sweat spot for every method on risk management vs gain.

Regards,
More...
Stops really need to be outside of the noise so the further tightening likely caused the stops to be inside the noise. This is all part of PRM.
 
ironchef said:
Buy1Sell2,

I used to think what you said was a bunch of BS.

But last night I re-ran a method I developed and something very interesting happened to my simulation: The backtest results all turned profitable when I tightened the stop losses but further tightening created losses again. So there is a nonlinear effect and I can fit a polynomial on the profit curves.

Perhaps you made a good point, by managing risks better, some methodology can create an edge? what I mean is the relationship between missing big winners and tightening losses are nonlinear or one to one. There maybe a sweat spot for every method on risk management vs gain.

Regards,
More...
This makes sense and I hope this works out for you! But you might also consider that B1S2 is saying risk management is the "METHODOLOGY"...what you're saying is risk management is improving your methodology into an edge...BIG DIFFERENCE!:) P.S. Otherwise you could just enter randomly...if B1S2 is correct.
 
ironchef said:
Buy1Sell2,

I used to think what you said was a bunch of BS.

But last night I re-ran a method I developed and something very interesting happened to my simulation: The backtest results all turned profitable when I tightened the stop losses but further tightening created losses again. So there is a nonlinear effect and I can fit a polynomial on the profit curves.

Perhaps you made a good point, by managing risks better, some methodology can create an edge? what I mean is the relationship between missing big winners and tightening losses are nonlinear or one to one. There maybe a sweat spot for every method on risk management vs gain.

Regards,
More...

your time would be much better spent buying a lotto ticket :)
 
Virtually every wildly successful trader places risk mgmt as the most important aspect in trading.

'Risk control is the most important thing in trading.' Paul Tudor Jones
 
comagnum said:
Virtually every wildly successful trader places risk mgmt as the most important aspect in trading.

'Risk control is the most important thing in trading.' Paul Tudor Jones
More...
Did you mean to say..."Virtually every wildly successful INVESTOR places risk mgmt as the most important aspect in INVESTING"?:D As a short term TRADER I would die without my edge!:)
 
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