I guess I have trouble even calling that risk management. If anything, the risk is increased the further price gets away from you. I would actually call what he did position management, which is kind of opposite to how you say it. I would say its good position management because he in fact averaged up his position average, so his entry position got a little better each time he sold higher, but his risk kept getting worse and worse. Now seeing as this was natural gas, it more than likely has different rules since its a commodity and not an equity index and is more than likely a bit more mean reverting, so it makes more sense to add to a short that keeps going higher, but my gosh, its just not a good strategy in the long run me thinks.
When you explain it like that, I have to agree with you, your descriptions are better. I would stay with your explanation, it's much more logical.
OMG... I'm right about something? Sweet! I'm gonna screen capture this post and use it as my desktop background! LOL
Depends how you look at it. I give timing much more merit than others, allows me to exploit leverage and control risk with precision, which is why I thought, regardless of outcome, that this trade was a complete disaster. (Sorry Magna, trying to behave) It's not about being right (eventually) but about making money, with the least amount of risk possible.
One of the characteristics that allows me to excel in trading and in life is that I have absolutely no problem accepting and stating that I was simply, mistaken. It works wonders
Fully agreed. And I can tell you that on the opposite end, when a trade fails and you "feel" like you did something wrong, its about the worst position you can be in with regards to trading since its not the right way to look at it. This is what also makes RM's trade so interesting. It seems like he was very personally invested in being right about the short, and even his initial doubt made him already have an answer for if it went against him, knowing that he would add to the short higher up. I think that he almost has a need now to maintain a greater than 90% win rate with this journal, and so this may make for some problems down the road.
High accuracy regardless of heat vs Inferior accuracy tight heat, he obviously is of the former "camp" of traders.
Dang, I saw this thread pop up to the top of the list, and I was hoping it was RM with one of his calls. Oh well.