Agree-. Most have it backwards. Risk Management is determined first and then entry/exit strategy can be added.
The "Aha" Moment!
- Thread starter Sweet Bobby
- Start date
“ Entia non sunt multiplicanda praeter necessitatem."
No more things should be presumed to exist than are absolutely necessary. (Occum's Razor)
I agree with this, in sequence...
entry/exit strategy is (normally) tied to a type or style of trade/trading. The strategy itself provides the risk parameters, which are ALWAYS within what I call the catastrophic risk scenario. You would likely consider your TNLW parameter as catastrophic in this context. Catastrophic is NOT appropriate for every trade, as actual trade parameters ALWAYS have lesser risk. But you have to know the entry strategy(not the same as knowing the entry price) in order to apply trade risk parameters.
No matter, PRM is in no way an edge to profitability.
Completely wrong! You have your system in place and your criteria for entering and exiting! You then base your decision to take the trade or not take it in the size of your stop and your profit target! You then decide where when and if you take the trade if it is according to your back tested plan! You don't take a trade just because you can keep your stop loss small! Not really sure where you get your information but it's complete nonsense!
First the strategy, and depending of the behavior (risk) of the strategy you develop a PRM.
You cannot develop a PRM if you don't know first the risk. And the risk is defined by the strategy.
You don't understand the concept of PRM.
I do but I don't understand you saying that it is the only edge! I agree it's very important but a strategy for entering and exiting is a separate part of a method!
The concept includes not just stop losses but managing trades to reap a fuller benefit which includes position sizing etc. A trader with good PRM will outperform nearly everyone in the market.