T2W Bot

Staff member
1,498 115
Risk management isn’t just about having your ‘stop-loss’ in place. So what else is it about?
Any trader who knows his salt will tell you that Risk Management is the single most important aspect in trading, regardless of style or technical strategy. Yet, most traders are really not able to define what "Risk Management" really is. Let’s pause for a moment, and think: can we define, in one brief sentence, what Risk Management is? "Loss control" would probably be the best broad definition, but to me this is a little more precise: In the business of trading the financial markets, Risk Management is the constant modulation of Risk Exposure to a constantly changing market. What is this exactly?
Most participants will relegate their entire Risk Management strategy to setting and adhering to "stop losses." But this falls far short of what Risk Management really is. To relegate the entire Risk Management strategy down to simple stop losses would be equivalent to saying "I am safe in my car...

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pssonice

Established member
900 12
the author is taken his thesis for real.
He didn't prove his thesis. No examples were given.
"A good thesis statement makes the difference between a thoughtful research project
and a simple retelling of facts"
The game of investments goes far deeper.
Andree Kostolany thesis goes far deeper and has been proved :
There is undeniable proof that a long term investment runs into profit.
"The proof of the pudding is in the eating"

P.S. :
# SIZE: The more we expose our account,
the "larger" the exposure.
# FREQUENCY:The more frequently we trade,
the more we are exposed to the markets' motions over time, the more risk we assume. Also, commission costs become a factor that significantly affects risk levels as we increase frequency.
# DURATION: The longer we are in each trade,
the more opportunity the market has to travel, the higher our risks will be.
 

zentrader22

Member
62 1
Risk management...

Imho, the main problem concerning risk management for many (not only new!) traders is, that they aren' t able to calculate a sufficient account size in dependence of their selected trading concepts or systems.

Risk is even under-estimated under known current market conditions, but specially under possibly changed market conditions in future.

There are methods out (not to solve all problems, but) to help in this context (monte carlo simulation, data scrambing etc.), but there's some experience and knowledge necessary to see the big picture...

bye,
zentrader
 

_coda

Junior member
45 5
I can only assume (as it is not made clear) is that what the author means by "building a buffer" is that in order to increase any risk one first needs to increase the amount of capital, presumably by sensible trading, before increasing the amount of risk being carried. Can there be any other kind of buffer?

I assume that R is a dynamic amount, based on your account size (assuming only 1 trading account without reserves elsewhere) and not some constant based on your initial capital. This would automatically adjust as the account size (capital) changes. No?

The three settings can be fiddled with but ultimately R stays R and should guide your exit on losing trades.

Have I missed the boat here completely?
 
 
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