Prudent Risk Management Is The Only True Edge In TRADING

Discussion in 'Risk Management' started by Buy1Sell2, Jul 6, 2015.

Is Prudent Risk Management the only true edge in trading?

  1. Yes

    53 vote(s)
    29.9%
  2. No

    124 vote(s)
    70.1%
  1. comagnum

    comagnum

    When you overlay sound risk management with the highest probability trades you chances of success are real good. It's basic game theory. If your winners are three times of more larger than your losers and your bets are no greater than 2% of your capital you should be making money over a long enough sampling rate and be able to bounce back from even the worst losing streaks.
     
    #321     Nov 15, 2016
    MagicMike likes this.
  2. MrScalper

    MrScalper

    If you take 100 people into a room and show them the marbles game in relation to risking money in the markets, the results will more than likely be that over 80% of them will lose most or all of their allotted money.

    Will any of them learn from the experience. The chances are about 1%.

    The big question is why most who try are just unable to comprehend the real truth in what you have posted?
     
    #322     Nov 15, 2016
  3. MrScalper

    MrScalper

    My answer to the poll is No.

    Prudent risk management is a necessity for successful trading, it is not an edge.

    An edge is something like understanding what it is you are doing, why you are doing it, why the results you achieve are so, and then working on this information to improve on what you are doing and your results.

    Thinking that an understanding of certain TA or specific chart reading methods is not a real edge, as the underlying reasons as to why the TA or chart reading methods work can not be identified. In other words, this means that they only work some of the time and not most of the time.

    A true edge is something like understanding the relationship between certain markets, also known as inter-market relationships. The underlying reasons as to why certain markets exhibit certain relationships can be identified, and this means they can work most of the time and not just some of the time.
     
    #323     Nov 15, 2016
    dealmaker likes this.
  4. Buy1Sell2

    Buy1Sell2

    The reason that the vast majority of traders lose their funds is the inability to exercise Prudent Risk Management. On the other hand, the ability to implement it is what sets winning traders apart from the rest of the pack. ---Prudent Risk Management is not just a necessity---It IS the edge.
     
    #324     Nov 16, 2016
  5. Pekelo

    Pekelo

    PRM should be a beer. If your strategy sucks, PRM will still lose your funds, it just going to take longer...
     
    #325     Nov 16, 2016
  6. trdes

    trdes

    It's an important one and not sure you can make a long term career without it, but it's definitely not the only edge.
     
    #326     Nov 17, 2016
  7. I Know You

    I Know You

    All you need to establish is macro bias of a XYZ that you are considering to trade, a simple moving average will do, hardly an edge on it's own according to most on ET. The rest is taken care of by PRM. Buy1Sell2 is spot on.
     
    #327     Nov 18, 2016
  8. MrScalper

    MrScalper

    Not really, as without sound judgement based on skill and experience prudent risk management will not be of much use and the trader will just bleed dry more slowly. It is a necessity that allows you stay in the game long enough so that you can learn the skill and use sound judgement based on solid facts.

    Ask a newbie to trade the ES or NQ with tight stops of 2 to 4 ticks (perceived prudent risk management) and he will more than likely do it as he has no real experience.

    Ask an experienced daytrader to trade the ES or NQ with the same tight stops, and he will more than likely tell you to get lost as he does not like throwing away money.
     
    #328     Nov 18, 2016
    profitlocker likes this.
  9. Buy1Sell2

    Buy1Sell2

    Setting stops is only a small portion of Prudent Risk Management. You don't understand the concept --sadly.
     
    Last edited: Nov 21, 2016
    #329     Nov 21, 2016
    comagnum likes this.
  10. MrScalper

    MrScalper

    If you really think that prudent risk management "is the edge" then you really do not know much about trading --sadly.
     
    #330     Nov 26, 2016