This is my post from another thread. I believe it backs the notion that PRM is key: - Edge in trading, to me, is when you make your own odds in such a way that your future bad runs will be offset by the gains. If you're looking to buy XYZ you really ought to do so as close as possible to the get out zone. If you're a price action trader then double/treble bottoms/tops can be the only patterns in your arsenal. Anticipation of their occurrence is a skill to develop. Make your own odds.
Listening to other people talk about trading can cost you a lot of money if you are easily led and influenced by others. If you are this type of person, then it is best to keep away from the financial markets and hold on to your money.
Prudent risk management can mean different things to different people, but when it comes to trading the understanding of what it really means is not really grasped by most who dabble. It has been proven to most people on this site who have tried, that risk management by itself will not guarantee success (success meaning the ability to make consistent money when trading or investing). Without the proper understanding of why you will lose money when trading or investing, then it will be very hard to make money when you try. This might sound simple, because it is simple. Most people can not understand simple things, and seek out complications for reasons that are not really known, for if they were known then one would not continue to complicate matters. Trading or investing (successfully) is not simple. It is one the hardest things in the world to master. It can be mastered by any individual who has a thorough understanding of the market/instrument they pick, whilst using proper risk management techniques to avoid over-trading and balancing the closing of winning positions with account value. It is a hard and tough game to play, and is not for those who are easily led and influenced by other people. Your "true edge" in trading is your ability to understand your capabilities and your short comings, and using both to make sound and proper judgements in relation to placing and exiting trades in the chosen market/instrument. The better you get at understanding, the better your results (and vice versa of course). The only thing worse than not knowing, is not knowing that you do not know
I don't think he said about risk management is the edge The question is in what is risk management itself and that it's not just settinf stops
You have to be experienced to even comprehend term "prudent risk management". It entails much more than just how much to risk which should be based on profitable trades and not necessary what is logical. For those who needs pats on the back regarding R to R, I have to laugh, cause risk is limited to how much you can borrow, some gambler who doing 10 lot on $5,000 in ES, if something awful happened and they were long and market just closed unexpectedly, one-two weeks later markets resume $10k down each lot, there shoots the 2% risk. Whether you trade with 2-4 ticks or points depends on time and back testing which builds experience. Anyone who thinks they going to walk into trading and pulling out money within a year is either dreamer or beyond genius. To become experienced, it is generally all OJT and many years. And as years pass, "Edge" might change within you of what you think it is, but bottom line, more experience you attain, should make you better, better entries, perhaps tighter stops, better exits, AND start enjoying more of what you are doing.
It is clear that you do not have a full grasp of what is meant by PRM. Once you do, you'll realize that it's the only edge in successful trading.
I will try and keep this short and sweet. Trading or investing successfully requires an awful lot of things to line up. The better you understand how finance works then the better you get at understanding why most of what is out there is useless when it comes to making money trading or investing. Being careful about how much you risk on each trade, how fast you get out of losing and winning positions, or how much you scale in and scale out of positions, will not provide you with any guarantee of success. In order to be successful (make consistent profits) then you must be prepared to learn the basics of finance, and then move on to the particular facets of the market(s)/instrument(s) you have chosen to trade. Those who embark on the journey to fast and easy money by means of TA, PA, FA are not seeing the big picture, and the reasons why can be clearly understood once the basics of finance are studied and recognized. Many laughed and ridiculed Donal Rumsfeld when he said.. Only a small few (in comparison) knew exactly what he was speaking about. He might have made some very bad decisions in his days, but this statement by him showed that he is in fact a very clever man.
Of course not Prudent risk management will lose you money if you do not have a positive expectation on your bets (Try using risk manage on a roulette wheel. in the longrun, you will lose roughly the house advantage spread over all your bets, no matter how you manage the bets and your bankroll) Successful traders and gamblers weave expectation, varience and volume into a livelihood- or more! Find a worthwhile edge, exploit your edge, and "stay in the game"