Stops Vs. Drawdown

Discussion in 'Risk Management' started by ProfitTakgFool, Sep 9, 2008.

  1. It depends on the type of trade but let's not forget risk management is one of your best friends in trading.

    For instance, if the price action clearly states that the bulls are in control, adding to a losing position as you short could be very dangerous business. On the other hand, if price has consolidated in a range and your entry is quite strategic, that gives you the power to apply some money management skills and take advantage of the current price situation.

    In the end, the best advice I can provide is to make the effort to enter as strategically possible as you can, and this takes patience, but this patience will be rewarded by paying you with valuable information even when you get stopped out, making it a win-win situation.

    When you know you are wrong, it just does not make sense to add to a losing trade so try to initiate your trade in a way where there could only be three outcomes:

    1-Profits
    2-Valuable Information
    3-Both

    In essence, obtaining profits from a trade is a very good thing, but so is obtaining valuable information while not paying a high premium for it.

    Emini Guru
     
    #21     Sep 12, 2008