Thoughts on Risk Management

oilman5

Well-Known Member
#41
I beg to differ in just one of the lines.

We cannot win if we feel we are fighting with self/other traders/markets....
Why fight... just flow with the movement, its possible you may take multiple small losses before getting the trend right, but thinking of the mkt as going to war with other traders and trying to battle your way to victory will make things more harder than they really are
..........................................
Thanks sir,
this view is because.............we r by birth not at all trader,......say first doing ur swot.........u know what u r,......so from somewhere u r transforming u a trader.
First i am giving a hypothetical case,.......a math postgraduation topper, shifting to a trader. As to learn trading,......it takes time,........so u r doing some formula - model to know ,what may work as a trader for u.
U may choose.......arbitrage model, or simple random mean reversion, even excel based fundamental equity based.......forecasting proforma model. Now u find , based on actual what is gap,........ie. error,.......but being trained mathematician,......u cant take.......possibility for absolute number to change, objectivity works for u,........but since system itself is variable,.........u have to understand.........block with number itself is harmful for ur development as trader,......conceptually to take 300pt up, followed by 450pt down within 3 days......tells either ur programming is wrong OR ur mathematical idea-notion is wrong.............this is a type of internal fight.
similarly u understand........u have u learn certain thing,.......but time constraint or other priority ..........makes u choose...........so again come fight against U.
Next i am telling my chess case,.......in chess as i have learnt in childhood.....understand pattern , but for competition...........u must fight till death,........use ur best defence skill ......when playing against GM.
.............now understand the problem with me,.......i was known as av chess player........my rank was within single digit,in my state in 1975.......and after that with chess study of 10 yr.........later i am shifting to tradelearning,........
YES u r not supposed to fight,.........but i can not take loss,.........simple a trade loss is nothing.........just wont hold it,.........or else face mother of all loses...........a la 5lakh..............i know how much bleed by it.
In trade ,pure small losing trade should be thrown out first...........but due to my different conditioning i showing fight back attitude,......create trouble for my trading a/c..........this i call fight within self.
.................................
Yes against other trader means opposite direction u have to commit with money.
But against Market...........particularly flow of FII?MF.......i should be with nor against them.
FOR stopping newspaper/tv .......only to follow by price..........it takes me lot restriction .......more than 3 yr........here also i faced internal fight in mind.
...................
hope i clear my view.......So far flow with flow is best........but is difficult for me:(
 

oilman5

Well-Known Member
#42
can you share your thoughts on portfolio management?
.......................................................................................
This is the topic.......i am interested to learn. Definitely some indians know it , i have not seen to talk ..........literature may be strictly secret.
Bookish View;........dont put egg in one busket.
3 case scenario..........cash -bond- stock
Ur edge-risk taking capacity,holding period.......interrelation,alfa/beta
....................................................................
Actual case sofar i smell.........sector rotation
when risk is higher........u may sit on cash.
if u dont know, u have to learn..........make no investment.....be cynic.
better be contrarian.........atleast against media hype.
Simple strategy of playing aggressive on winner gives better return.
Savant/Traderji/AW10......may have some idea........they may help, but in public whether they shall post?.....i dont know
btw...........PMS persons in india .....some pie chart......with least inter dependency sectors.............r wrong thing to copy.
Only literature i have seen by Mr Boucher.......trainers of fund manager
 
#43
..........................................
Thanks sir,
this view is because.............we r by birth not at all trader,......say first doing ur swot.........u know what u r,......so from somewhere u r transforming u a trader.
First i am giving a hypothetical case,.......a math postgraduation topper, shifting to a trader. As to learn trading,......it takes time,........so u r doing some formula - model to know ,what may work as a trader for u.
U may choose.......arbitrage model, or simple random mean reversion, even excel based fundamental equity based.......forecasting proforma model. Now u find , based on actual what is gap,........ie. error,.......but being trained mathematician,......u cant take.......possibility for absolute number to change, objectivity works for u,........but since system itself is variable,.........u have to understand.........block with number itself is harmful for ur development as trader,......conceptually to take 300pt up, followed by 450pt down within 3 days......tells either ur programming is wrong OR ur mathematical idea-notion is wrong.............this is a type of internal fight.
similarly u understand........u have u learn certain thing,.......but time constraint or other priority ..........makes u choose...........so again come fight against U.
Next i am telling my chess case,.......in chess as i have learnt in childhood.....understand pattern , but for competition...........u must fight till death,........use ur best defence skill ......when playing against GM.
.............now understand the problem with me,.......i was known as av chess player........my rank was within single digit,in my state in 1975.......and after that with chess study of 10 yr.........later i am shifting to tradelearning,........
YES u r not supposed to fight,.........but i can not take loss,.........simple a trade loss is nothing.........just wont hold it,.........or else face mother of all loses...........a la 5lakh..............i know how much bleed by it.
In trade ,pure small losing trade should be thrown out first...........but due to my different conditioning i showing fight back attitude,......create trouble for my trading a/c..........this i call fight within self.
.................................
Yes against other trader means opposite direction u have to commit with money.
But against Market...........particularly flow of FII?MF.......i should be with nor against them.
FOR stopping newspaper/tv .......only to follow by price..........it takes me lot restriction .......more than 3 yr........here also i faced internal fight in mind.
...................
hope i clear my view.......So far flow with flow is best........but is difficult for me:(
sir,

LInkon told me earlier you are veteran and master of the art. this post gives some more light into your self.

chess - mathematics - logic - computer science - financoal markets - trading
there are some relations, I had some small touches in these fields. eagerly awaiting your further posts and thoughts.
 
#44
.......................................................................................
This is the topic.......i am interested to learn. Definitely some indians know it , i have not seen to talk ..........literature may be strictly secret.
Bookish View;........dont put egg in one busket.
3 case scenario..........cash -bond- stock
Ur edge-risk taking capacity,holding period.......interrelation,alfa/beta
....................................................................
Actual case sofar i smell.........sector rotation
when risk is higher........u may sit on cash.
if u dont know, u have to learn..........make no investment.....be cynic.
better be contrarian.........atleast against media hype.
Simple strategy of playing aggressive on winner gives better return.
Savant/Traderji/AW10......may have some idea........they may help, but in public whether they shall post?.....i dont know
btw...........PMS persons in india .....some pie chart......with least inter dependency sectors.............r wrong thing to copy.
Only literature i have seen by Mr Boucher.......trainers of fund manager
As usual some lines, words i could not follow

- sector rotation
- playing aggressive on winner gives better return
btw...........PMS persons in india .....some pie chart......with least inter dependency sectors.............r wrong thing to copy


can you give brief (gist of learning points ) on Bouchers book for finacial illiterate like me?
 

oilman5

Well-Known Member
#45
As usual some lines, words i could not follow

- sector rotation
- playing aggressive on winner gives better return
btw...........PMS persons in india .....some pie chart......with least inter dependency sectors.............r wrong thing to copy


can you give brief (gist of learning points ) on Bouchers book for finacial illiterate like me?
.............................................................................................
sector rotation is a simple concept for efficient market.......many MF cannot totally get out of market , and they actually put back in some sector which was dumped earlier........normally cycle varies.........10month to 20month to moneyflow back in a sector,........also swing flow is possible 1month to month gap .
Playing aggressive on winner.........MM strategy
PMS ...portfolio management service
Pie chart........representation by circle , fund allocation....bookish idea of 1952
Mark Boucher.........authority on practical appln of financial managent normally trains billion $ handling fund managers.......in 1994-2002.
search in suitable place like 4shared/tradingmarkets........u may get it.
 
#46
.............................................................................................
sector rotation is a simple concept for efficient market.......many MF cannot totally get out of market , and they actually put back in some sector which was dumped earlier........normally cycle varies.........10month to 20month to moneyflow back in a sector,........also swing flow is possible 1month to month gap .
Playing aggressive on winner.........MM strategy
PMS ...portfolio management service
Pie chart........representation by circle , fund allocation....bookish idea of 1952
Mark Boucher.........authority on practical appln of financial managent normally trains billion $ handling fund managers.......in 1994-2002.
search in suitable place like 4shared/tradingmarkets........u may get it.
I dont read many books. So my vocabulory is devoid of words like fund mgmt, strategy, portfolio, etc. etc..

but what i feel is, logic of trading is simple.

you buy something at X rs and try to sell the same thing at X+pt Rs

pt must cover for other expenses incidental to transactions (buy and sell)..let us call them transaction costs.

so pt = trcost+pft
so 1)buy at X sell at 2) X+trcost+pft

now the timing .. either 1) can happen first or 2) can happen first or both can happen simulatneously

some ppl tell me that they bought at X but X+trcost+pft never occured

some ppl tell me they sold at X+trcost+pft and X never occured

ppl like linkon, and other experts say that they read some charts, and find out some possible X values, which will always force 1) and 2) happen and at time when the fail in their faith, they do either 1) or 2) at value less than X or

there were many books, many softwares written on finding out such X values

I think we should split X into two components now

X = nx

n = number of units
x = price of individual unit

I feel the value of n has some effect on x and vice versa

so our 1) is now buy @ nx and 2) is now sell @nx+trcost+pft

we cant load the trcost+pft in n so we change the second equation 2) n(x+trcost+pft)

smaller the value of trcost+pft, higher the probability of 1) and 2) occuring.

Let me know in this simple logic, where does risk and risk management fit in?


(
As we progress, i think i need to give a bit more on our backgrounds (at least in the fields concering this discussion), chess - mathematics - logic - computer science - financoal markets - trading. I played around 18-20 years last being a championship at national level in 2000, mathematics - graduated in Math with a score of 100% in most papers i had interest like calculus,complex analysis, real analysis, differential equations etc., had some love or liking for logic, so took to comp. science from reputed university in chennai may be under the best men available in the country during that time. diverted into the world of finance, partly because of a job in banking, and partly on account of some senior guiding lights who now occupies top positions in banking. Took to trading for others [because i never had the kind of money required in trading]
as far as reading books - i am a lazy guy now - wish more spoon feeding from ppl like you
in trading - search for ideas - innovations from ppl like linkon - sheer laziness to think anything new and innovate
)
 
Last edited:

oilman5

Well-Known Member
#47
the logic of risk management and simplicity in trading is absolutely right.
But for stock trading.......pms exists ........and believe me ,fundamental really counts.
Result of stock/news has some role to play.
its the big fish .......they decide market.........so from certain characteristic & moneyflow u can with high accuracy tell.........where in particular direction trade is possible.Infact ur theory best work in forex........u may play there.
ps; if i come for summer national at Madras ,may meet u
regards
regards
 

oilman5

Well-Known Member
#48
we study Trend to understand ..........trend reversal in near future possible or not..........so that's an oppurtunity.Be ready for possible scenario.
Again by seeing a Trend , check if in higher timeframe Continuity is possible(highly probable)........so that we shall not exit from a position,........if momentum also supporting then we may add........in Trend continuation.So trend itself not imp.......but Trend continuation -trend reversal.......chance of each of them happening and moving the same principle to higher timetrame........key theme of usefulness of trend.
when u understand trend exhaustion ,,,,,,,,,,,,so money making possible.Actually another 2MM principle is imp......Marginal trade & opputunity trade.
Marginal trade concept :you r in a position .......trade move in ur direction, u earn by booking profit..........only to see later ........trend is continuing ie. by simply holding u could have earn more.So u have to consider ur trade profit potential by creating ratio by profit booking ,divided by total move of stock in just next highertime frame.
OPPurtunity trade concept : here u r holding some position , so u r seeing some new oppurtunity , since ur money is blocked........u can not enter in potential trade, after some in ur time frame.......trade is making desired profit,......but for its on paper ,as u can not take the real trade,so restraint of fund .Similarly 3oppurtunity comes ,u put money on 2,......after some only to see thirdone gives better move.......alas for u its again a paper profit........TRADE oppurunity .
Elimination of this 2 mistake can improve ur trade return dramatically
 

oilman5

Well-Known Member
#49
A child even can earn with Discipline , when its long term Bull market starts,by utilising 2weeklyMA with 8weekly MA '........its a tool to suggest for bull market arrived and shall exist atleast for some time.
Counter-trend system is a traders tool, algother in different market context.For short term reversal study,5day DEMA .....its slope is sufficient to tell ,when the market is changing its characterisic.For oppurtunity search , even simple Scan based on 10d William%r ........is sufficiently ok to give u ,candidate to Right trade.
...................................
when market enters in volatile zone,............its futile to use trend/nontrend systems.
...............................
to earn......believe in own system & use stop,........or simply switch to different system which work in present market context.
.............................
understand context first, u have data ........just see WHAT its telling.pl believe KISS
 

oilman5

Well-Known Member
#50
........recently i read in professional traders' coaching .....this hypes r created to serve illusion to newbees to lure TRADING IS EASY.....ensuring suppliers of fools,.......so the industry can earn,its a coldblooded fact in industry, as if indian solders were cannonfeeder in 1st world war for britishers.
 

Similar threads