Very good thread to discuss about after all I strongly believe money/risk management is the holy grail which can turn a bad trader into a winner and winning trader into an expert trader.
Expecting more views from others. The rule I usually follow is max risk cap is my portfolio should not exceed 20% of my capital and single trade should not exceed 2% of my trading capital.
I check the possible max draw down in my system and have 2 times of that amount separately, so that even if I go bust I can still start all over again without reducing my position
Expecting more views from others. The rule I usually follow is max risk cap is my portfolio should not exceed 20% of my capital and single trade should not exceed 2% of my trading capital.
I check the possible max draw down in my system and have 2 times of that amount separately, so that even if I go bust I can still start all over again without reducing my position
'I strongly believe money/risk management is the holy grail which can turn a bad trader into a winner and winning trader into an expert trader'
Do not agree.
This is a very common misconception in trading (for that matter, any kind of speculation, even gambling, poker etc). No amount of money management expertise, or any kind of betting progression or system can make you winner by itself, YOU NEED to have a positive edge, once you have a proven edge, no matter how infinetessimily (spelt tht wrng) small, you can compound your money forever and money management will come into play (i.e. those who have an edge and dont follow it are most probably doomed). So you see my contention is that even though a trader with an edge absolutely needs to practice sound money mangement (Defense)(Even though agro MM strats are there, you still need it), you CANNOT turn a trader with NO edge into an expert trader just through the sole use of sound MM (not offense).
Basically its like a death by a thousand cuts, you keep getting stopped into ruin, you get me ! Search for a certain poster named Hanover on FF, he has some extensive proofs on this (close to proofs can get in this industry lol), i would rather not rehash them. Basically use google, you will get it.
Its just like moving your stop to breakeven or scaling in or out, weather to use targets or a trailing stop etc. No one method will get you the most, all have pros and cons depending on market conditions. Matter of fact, sound MM suggests many pros who do not risk more then 1% of their acct on any one trade, BUT this is not the best or most optimal way to make your account grow (look up Ralph Vince and read his stuff regarding optimal f), its just that personal utility suggests protecting your acct ( and livelihood) first ie the chips you have are more important then the chips you can get (think poker tournaments), thus sound MM will protect your edge, not create, neither enhance it.
Good luck and keep it up.
P.S. The reason i picked this post out of probably 500 read tonite was because I too was misinformed and had the illusion of MM making everything right (and bought into the whole, psychology is 60% MM is 30% system is only 10% b.s., think about it, psych and MM are so intertwined, they are practically the same as you position size is the most important decision in the trade). But this is not so, aspiring traders would do well to put in the 10,000 odd hours of screentime (give or take a few thousand hours) and create an edge they are 'comfortable' with. Side by side a look into yourself and your psyche during these years will help out in its own way when the time comes. Then with sound MM and a couple of busted accts, you can be off to the races. This is not a game, and trading is not called the final frontier for nothing (you can basically write your own check with an edge), this is a lot of hard work, a lot. Out of a 100 traders who try to go pro (not counting part time traders or hobbyists, saying PRO, only 5 will be profitable after say a 1000 trades (if your a daytrader, less as u jump up in timeframes), so maybe a year plus, BUT in five years only 1 will remain. Only ONE. These are obviously generalized numbers, but the point is made..... finding an EDGE is crucial and NOT easy, but absolutely vital to have to attain any kind of success. Otherwise its just luck, and we know how that goes.
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