Prudent Risk Management Is The Only True Edge In TRADING

[Buy1Sell2]

Yeah,pretty sure Simmons did ALOT of optimization of stops before coming up with big mathematical models

Then we are agreed.

 

[taowave]

Sure if it helps you sleep at night, why not???

Then we are agreed.

 

[Laissez Faire]

I would disagree that PRM is the only true edge as it isn't an edge per se. PRM would only make you bleed out slower if you don't have a method with a positive expectancy.

On the other hand, you might have a method with a positive expectancy which blows up merely on noise because you don't utilize PRM. So, it's no doubt essential for trading success, but without a method with a positive expectancy, it won't make your success.

 

[Buy1Sell2]

I would disagree that PRM is the only true edge as it isn't an edge per se. PRM would only make you bleed out slower if you don't have a method with a positive expectancy.

On the other hand, you might have a method with a positive expectancy which blows up merely on noise because you don't utilize PRM. So, it's no doubt essential for trading success, but without a method with a positive expectancy, it won't make your success.

Proper utilization of PRM creates positive expectancy and thus is the only true edge in trading.

 

[tiddlywinks]

Proper utilization of PRM creates positive expectancy and thus is the only true edge in trading.

You sound like an idiot!

Positive expectancy is defined as... how much money, on average, we can expect to make for every dollar we risk.

At it's best, PRM is a valve to control the Average Gain/Loss of a particular trade/system/method. The valve does not create Expectancy, positive or negative.

 

[taowave]

Cmon,now you are just trolling

Proper utilization of PRM creates positive expectancy and thus is the only true edge in trading.

 

[ironchef]

@Buy1Sell2, PRM is necessary but not sufficient.

No one is arguing with you that it is a necessary condition. The question is if it is also a sufficient condition for profitable trading?

If it is necessary and sufficient, then you can make money even in a random market. Unless there is an error in my code, my simple and quick simulation does not support your claim.

 

[ironchef]

I do want to give @Buy1Sell2 credit. Here is my post on another thread:

I want to say again that reading @Buy1Sell2's Risk Management thread is one reason I am so far profitable.

Risk management is a necessary condition to be profitable. Is it sufficient? I don't really know yet.

 

[taowave]

And we need to make the distinction between trading and investing, which the OP did. Regardless,There is no 1 single miracle cure

I do want to give @Buy1Sell2 credit. Here is my post on another thread:

 

[Buy1Sell2]

Positive expectancy is defined as... how much money, on average, we can expect to make for every dollar we risk.

But in your response you overtly use the word risk. This is all we can control----risk. PRM is not just about cutting losses, it is also about maximizing wins. This is the only True Edge in trading.