Risk management importance - Trading-Lab

OverTheTop · #1 03-11-2008, 03:29 PM

Hi everyone,

I've been trading for more than a year now and following this forum since its inception. I think I'm at the point in my trading career where I'm almost able to "see the light". Is it true that having rigid risk/money management rules in place is the most important thing in trading? Ideally, every strategy can potentially make money. money management determines whether you will actually make money or not with that strategy? am I correct? if not, what is next in terms of priority when it comes to trading skills every trader should master?

entries, exits, or?

thanks

Leth · #2 03-11-2008, 11:11 PM

In my perspective, Risk Management IS trading. If you look at trading as more of a defensive game than an offensive one (by focusing on not losing money); this is what will make you profitable over the long run.
As far as what comes next (entry, exit, etc), all are categorized as Risk Management; which means they are one in the same (equally important to the whole).
There is an old business axiom that says, "focus on your business and the money will come." Ahhh...the beauty of compounding.

Ride winners
Cut losses
Trade with the trend
Keep your bets small

Seeing the light is definately "enligtening".

Soverus Khan · #3 03-12-2008, 11:17 AM

Remember...risk management is never completely "controlled". At least for me.

The mistakes I still make to this day are letting stops go by and eating a bigger loser. Sometimes this is due to a crappy fill. Other times it is because the pattern still "appears" to be valid and that mentally chokes your vision of reality.

I rode a bad trade yesterday that ate the entire day's profit. Net zero by 4pm. This is the exception, but it still happens.

Stay vigilant!

Thread Tools	Search this Thread
Show Printable Version Email this Page	Search this Thread: Advanced Search
Display Modes
Linear Mode Switch to Hybrid Mode Switch to Threaded Mode

Similar Threads
Thread	Thread Starter	Forum	Replies	Last Post
Low risk investments	FabMav	Alternative Investments	4	12-30-2007 08:16 PM
Free Risk Management Game	Leth	Risk Management	0	12-17-2007 08:13 PM
Introduction To Risk Management	Leth	Risk Management	0	12-13-2007 01:43 AM
The Art and Science of Risk Management	Leth	Trading Articles	1	10-25-2007 08:52 PM
Risk Management	Leth	Risk Management	4	10-09-2007 02:12 AM

#1 03-11-2008, 03:29 PM
OverTheTop Member Join Date: Jun 2007 Posts: 46	Risk management importance Hi everyone, I've been trading for more than a year now and following this forum since its inception. I think I'm at the point in my trading career where I'm almost able to "see the light". Is it true that having rigid risk/money management rules in place is the most important thing in trading? Ideally, every strategy can potentially make money. money management determines whether you will actually make money or not with that strategy? am I correct? if not, what is next in terms of priority when it comes to trading skills every trader should master? entries, exits, or? thanks

#2 03-11-2008, 11:11 PM
Leth Super Moderator Join Date: Oct 2007 Posts: 621	In my perspective, Risk Management IS trading. If you look at trading as more of a defensive game than an offensive one (by focusing on not losing money); this is what will make you profitable over the long run. As far as what comes next (entry, exit, etc), all are categorized as Risk Management; which means they are one in the same (equally important to the whole). There is an old business axiom that says, "focus on your business and the money will come." Ahhh...the beauty of compounding. Ride winners Cut losses Trade with the trend Keep your bets small Seeing the light is definately "enligtening". __________________ Nothing is more difficult than the art of maneuvering for advantageous positions. - Sun-Tzu Trade with the trend, Ride winners, Cut losers, Keep bets small, Use Stops - Old School Last edited by Leth : 03-11-2008 at 11:14 PM.

#3 03-12-2008, 11:17 AM
Soverus Khan Senior Member Join Date: Dec 2007 Posts: 306	Remember...risk management is never completely "controlled". At least for me. The mistakes I still make to this day are letting stops go by and eating a bigger loser. Sometimes this is due to a crappy fill. Other times it is because the pattern still "appears" to be valid and that mentally chokes your vision of reality. I rode a bad trade yesterday that ate the entire day's profit. Net zero by 4pm. This is the exception, but it still happens. Stay vigilant!