Risk Management Psychology

Discussion in 'Risk Management' started by bitstream_ryder, Dec 9, 2018.

  1. Handle123


    How about changing your mindset, how about when you want to add to position you figure out how to hedge the extra risk? I don't want to become a great trader, but I do want to become a better risk management trader and have spent past 8 years studying and applying what I have learned. Take your 2 percent risk, figure out what it is going to take to get the risk to under 0.50%, by getting it this low or lower, you can then add size up to original 2%.

    How many times have you increased size or risk and are all times been losses? The professionals do size rather inverse, as price goes up, their positions will often be reduced. If you check out extremes of stocks and futures, extremes show often light volume. So as you equity curve starts going up, at certain point of either dollar gain or percentage, at what point have you been increasing? If it is a certain dollar level or percentage, start reducing size and hedge.

    You can spend years trying to find out why you think the way you are self sabotaging yourself and five times more years trying to change self, or you can add more rules based on money levels or percentages. I use parabolics on my equity curve, which means when it breaks it, need to add more risk adverse measures. To me it is not about never having losses, we all have them, but for me best to have very small drawdowns.
    #21     Dec 24, 2018
  2. Make use exceeding funds not available: ask your broker to limit your purchasing power/limits in terms of stocks/lots and also place a daily maximum loss threshold that would flat out your trading position. Find a broker that is able to accomodate such requirements for the integrity of your trading efforts.
    #22     Jan 16, 2019
    murray t turtle likes this.
  3. %%
    That helps; including get a refund on Trading In The Zone.:cool::cool:

    AS far as being an action addict; get a better WRITTEN plan. An action addict channeled into research =could be a good thing.{NO offence to anyone, but like a wise EliteTrader said, ''skip the psychobabble'' }LOL+ true.:D:D

    If only you knew, Bitstreamm R ;get rich quick is like the lottery.As Dave Ramsey said ''a lotto is stupid tax on people that cant do math''

    By the way,even if BAC bought it=it was named it Chicago Research & Trading. It is not named Chicago Trading & Research. NOT a stock tip. Blowing up an account can prove a need for change..............
    #23     Jan 18, 2019
  4. %%
    Good points.
    And ''Nick Lesson'' lesson had his share of over size trading thrills; until he got caught forging documents + then 6.5 years in prison.......If the goal is thrills + oversize trading + 6.5 years pattern,in prison ;rinse + repeat.

    Also helping , is a good study of stats.
    If [repeat , if] you found something that worked 94% of the time; it could still be wrong more than 6 months or more in a row.That would cure 20-30 %risk.

    I am not saying,you could find something that worked 94% of the time, nor predicting that it would fail 6 months in row,again, if you were on the wrong side of that trend. But experienced traders may know those stats, which tends to stop stupid.

    Bitstream Ryder;i found something once ,that worked 20 years in a row, every Jan; but when i put on the trade, guess what??[100 % in the past 20 years] It did not work the 21st year.LOL now-not funny then @ all.:D:DGood thing i did not risk 30%; even though it was better than 94%/ profitable + in 21 years.
    #24     Jan 18, 2019
  5. drcha


    What is the worst drawdown you are willing to tolerate? And how should you allocate your funds so that this drawdown is possible, but larger losses are not? Those are the questions you have to answer. The first question is about yourself. The second is about your trading system.
    #25     Feb 7, 2019
  6. Once you become a successful trader with a long track record using a system, you will have a more finite understanding of how to gauge the risk per trade. Then you will have;

    1) more confidence to deal with losses and trust your abilities
    2) more information and experience to know how your system performs
    3) a greater understanding of how your psychology works in regards to risk
    #26     Mar 12, 2019
    qlai likes this.
  7. "A successful trader has faith that over time he will make money. Therefore, the results of any one trade are statistically unimportant. He thinks in terms of probabilities."

    "A successful trader is willing to accept loss. It is an integral part of the trading process. You know and accept at a deep level that individual losses and losing periods must occur as they are an endemic part of trading. You don’t like losses or expect to lose. You simply accept loss as a cost of doing the business of trading."

    "Remember there are no certainties in trading. Thinking in probabilities keeps you from tying your ego to a trade. Since any decision is only about probabilities, it’s no big deal if you win and no big deal if you lose."

    "By taking the long view a trader ceases to define himself by today’s trading. He and his trading are part of a much larger picture. He creates a boundary between himself and his trading. He creates a boundary between one trade and all the rest of his trading."

    Quotes from 'Habitudes of Highly Successful Traders' by Ruth Barrons Roosevelt. Highly recommended.
    #27     Mar 12, 2019
    smallfil and drcha like this.
  8. twox


    Most traders use RR 1:2 to 1:3, I think the best is 1:2
    #28     Mar 31, 2019
  9. IamaMars


    Understanding how you manage your risks is very important, and its much easier once you've traded for quite some time and had experience on the best risk management practices. Never risk too much or trade without a stop loss. Again, its wise not to take too much leverage
    #29     Apr 9, 2019
  10. twox


    #30     Apr 9, 2019