Prudent Risk Management Is The Only True Edge In TRADING

[virtusa]

Prudent risk management is not an edge, it is a separate factor to manage.

Risk management will not turn a negative expectation game into a positive expectation game! Try managing your risk on an unbiased and honest roulette wheel.

Exactly.

 

[virtusa]

If everyone is doing it, or knows about it, it can't be 'an edge,' by definition, imo.

Not true, IMO.
First of all it is impossible in real life that everyone would do the same thing.
Second, even if everybody would do it, it can still be an edge. Like "trendfollowing" can be an edge. Because trendfollowing can be different depending on the timeframe that is used.
"Buy cheaper and sell more expensive" is an edge that ALL traders are focusing on. Nobody wants to trade to lose money.

All people on earth have to make money to survive. So an edge would be to find a job and work. Billions of people do that and the edge is still working.

If you widen the definition of risk management then what OP says could be right.
In that case he means that anything you do is risk management. So each decision, each indicator, each chart pattern , so basically anything you do, would be risk management.

It just depends of how ridiculous far you go with the definition:
Even breathing might then be part of risk management, because if you don't breath anymore, you cannot manage your risk anymore.
Even reading ET can be included in risk management, because while you are reading you don't pay attention to your risk. And reading bad advice can even damage your risk management.
So everybody is right, and nobody is right.Depending on the definition.

However, if there is no position, there is no risk. So the most essential edge is to open a trade. That edge is the start. So risk management cannot be the only real edge.

What is a real edge? And also, what is an unreal edge? Because before you know it, you could start with an unreal edge thinking it was a real one.

This discussion reminds me of "Zeno's Arrow Paradox and an Infinite Series"

 

[deaddog]

Know your edge, exploit your edge-- survive the game

Prudent risk management is not an edge, it is a separate factor to manage.

Risk management will not turn a negative expectation game into a positive expectation game! Try managing your risk on an unbiased and honest roulette wheel.

The roulette rule is not an accurate analogy. If you could take your bet back after the wheel began to spin it would be closer.

Poker would be better, you pay a little to see your cards, if you don't like your chances you throw them in the muck.

Most traders blow up because they continue to play a losing hand.

 

[Buy1Sell2]

Risk management will not turn a negative expectation game into a positive expectation game!

Incorrect. PRM will most certainly create positive expectancy. Perhaps not in percentage of wins, but overall profit.

 

[Flowfollower]

After many years of strategy hopping and head bashing against a wall, I have finally been putting decent strings of winning days.

It has made me want to come back to this thread.

All I do now is identify a trend. Jump on it when the trend is resuming it's direction and then manage the trade without fear or greed. I have a stop loss and i have a target. I trail the stop loss to keep my risk in check.

What does this have to do with this thread? Well I believe that it is my managing of the trade which is the biggest factor to my profitability. This is prudent risk management. I'm not saying it's the only edge, but it can be all that you need so long as you can identify a trend.

 

[murray t turtle]

Know your edge, exploit your edge-- survive the game

Prudent risk management is not an edge, it is a separate factor to manage.

Risk management will not turn a negative expectation game into a positive expectation game! Try managing your risk on an unbiased and honest roulette wheel.

..... professional traders weave positive expectation, variance, volume into a livelihood.

Line Up:

Edge
Risk management
Volume
Opportunity cost

%%
MOSTLY right\ except trading or investing is not gambling or a casino.
NO THANKS on your'' r... wheel'' deal /LOL
NOT every edge is good\ the clown that drove the stagecoach close to the edge of the cliff/NEVER got the job=LOL

 

[ironchef]

After many years of strategy hopping and head bashing against a wall, I have finally been putting decent strings of winning days.

It has made me want to come back to this thread.

All I do now is identify a trend. Jump on it when the trend is resuming it's direction and then manage the trade without fear or greed. I have a stop loss and i have a target. I trail the stop loss to keep my risk in check.

What does this have to do with this thread? Well I believe that it is my managing of the trade which is the biggest factor to my profitability. This is prudent risk management. I'm not saying it's the only edge, but it can be all that you need so long as you can identify a trend.

How the Turtles trade.

Is that right @murray t turtle?

 

[murray t turtle]

How the Turtles trade.
Is that right @murray t turtle?

%%
THAT sounds right, good post #777.
IBD founder used 50dma + 200dma , more than turtle 55days.[QQQ+ other$ have been closing below 50dma.]
I do remember Rich [public record]said cut back size , after a loss=good. WHY waste capital, that'$ why he said cut back.
ON a uptrend but chop slop uptrend sector like XOM sector;
chop slop around $107.77, have to some times take a smaller profit than a good tech trend.
Amazing post #777 NOT a stock or ETF tip

 

[ironchef]

%%
THAT sounds right, good post #777.
IBD founder used 50dma + 200dma , more than turtle 55days.[QQQ+ other$ have been closing below 50dma.]
I do remember Rich [public record]said cut back size , after a loss=good. WHY waste capital, that'$ why he said cut back.
ON a uptrend but chop slop uptrend sector like XOM sector;
chop slop around $107.77, have to some times take a smaller profit than a good tech trend.
Amazing post #777 NOT a stock or ETF tip

Thanks for your response.

What is so magical about 50ma and 200ma?

 

[ironchef]

%%
THAT sounds right, good post #777.
IBD founder used 50dma + 200dma , more than turtle 55days.[QQQ+ other$ have been closing below 50dma.]
I do remember Rich [public record]said cut back size , after a loss=good. WHY waste capital, that'$ why he said cut back.
ON a uptrend but chop slop uptrend sector like XOM sector;
chop slop around $107.77, have to some times take a smaller profit than a good tech trend.
Amazing post #777 NOT a stock or ETF tip

%%
Also, sounds like you said 50dma is better than turtle 55dma, what if I use 45dma, would I be ahead of you?