I often hear people say "house money". The use of this phrase is often incorrect. When you are looking at you screen and see money, it is yours. If you are to roll the dice on your next trade or only take off half and lose, you did not lose the house's money. You lose your money!
If it's money above and beyond what your original stake was then it was money you won from "the house" at some point, meaning it was ONCE the house's money. But "Once the house's money" is kinda of long to say, so .... " house money".
But, the money that you make is yours. Profits on the screen should not be squabbled away any differently than money that is in your account or pocket.
I agree. Anytime I hear the term "house money" it makes me think the guy is a gambler. I bet casinos love the term because it keeps gamblers gambling until they lose it all back since the mooks think it was never theirs to begin with.
Disagree. Some of the best money management systems treat your original stake and the "house money" different. For example, they risk 1% of your original money "core equity" but let's say 5% of profits (numbers are random). As soon as you fall back below the zero profits line you only risk 1% again. Can be a fast way to build your account.
Actually, the management system described above is exactly how some professional gamblers size their bets.
risk and votlatility changes as the position starts to go parabola Starting with a 2% risk You ain't going to keep a 2% risk when it goes parabola. Unless you want to be stopped out of the positon very fast House money requires more risk
The placement of the stop has nothing to do with how much you risk. 2 different things: 1. you decide where your stop is, 2. You then figure how many shares you can buy based on risking 2% or whatever. You dont place the stop "2% away". Stock price is $50. Your stop is let's say 2 points away. You have 100k. You decide to risk 2% or $2000. So you can buy 1000 shares. If you want to risk 1%, you can buy only 500 shares. Stop does not change.
Uh oh, the word Gambling had to be used? I cannot tell you how many times I have to explain the difference between gambling and trading. "Oh, you are a trader? So is that like gambling for a living?"