The "Aha" Moment!

The point is valid in an overall sense... we can not control market behavior. However, in the context of my post it is control of execution. Execution as a result of any one or combination of analysis, opinion, or guessing.

No different than a non-trading business controlling how one advertises, selects product, selects location, or any other factor associated with running a non-trading business.

 

I fully agree with that.

 

Having an edge doesn't limit your risk at all - it provides a basis for calculating expectancy and justifying the acceptance of risk, if the EV is positive. But even a system with a 99% winrate and 100:1 payoff will blow up eventually if you bet 100% on every trade.

Likewise, if you practice ironclad risk control as to stoplosses etc. but take random entries, you won't make any money in the long run, except by pure luck.

So, it seems clear to me they are logically separate. Calculated expectancy (an entry/exit based edge for traders, or deriving from long-term cash flows etc for investors) tells you when it may be appropriate to accept risk, while risk management is about translating that expectancy into choice of instrument(s), position sizing, portfolio allocations and so forth.

 

Nice analysis--you are missing an important piece. ---letting winners mature.

 

Calculating expectancy and using it to trade is limiting your risk in the long term. If the probability to win is 75% instead of 15% it limits the risk as in the long run your chances are enhanced.

Correct as luck can never limit risks. That's why it is called luck.

Calculated expectancy is enhancing your chances, enhancing your chances limits the risks.
I agree that there are different types of risk limiting actions. But all these actions have all the same aim: reduce risks.
An entry/exit based edge for traders tries to find the optimal entry/exit, so that will clearly limit the risk.

 

I did not give the whole list, just a few examples. There are still more things missing.

 

Letting winners mature. That is pertinent on a style a trade, perhaps even dependent on a particular time, volume, or price-range.

And now you've moved into making an important point about PRM... PRM is applicable to all trades, all trading types, and accessible to all traders... As a standalone item, it is impossible for PRM to be "The edge" otherwise all traders using it would be profitable!

 

According to buy1sell2 as long as you don't risk more than 2 percent of your total net worth you have an edge

 

You don't understand PRM.

 

I understand that anyone day or swing trading the es would never have a 100 point stop loss but I'm pretty sure fortydraws pointed that out