Quote:
Originally Posted by rhodytrader
It was your statement about money management being approachable from two different angles that suggest stops and position sizing being independent.
In terms of "...if you need to use more lots, you can use a tighter stop.", that's one I have a problem with. Needing to use more lots implies to me (and please some one tell me if they take it otherwise) that the trader is aiming for a profit target. In turn, that means they aren't properly concerning themselves with the risk first.
This is where traders get into trouble with tight stops. They want to make $1000 on a trade and can do so if it moves 100 pips in their direction using 10 mini lots (or a full lot). But they only want to risk $100, so they put the stop at 10 pips. They aren't thinking about where the stop should be put, just how many contracts they want to trade. It's all backwards.
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I like that rhody, it makes alot of sense to me...I've been stradeling along the lines of falling into this trap after having a very good month last month...and I relized that I had such a good month b/c I cared for nothing about the money I could potentially make. I only focused on if the trade jumped out at me and at what time of the day is there the most market volatility...nothing blows more than knowing that your hourly position won't see any movement until london time because you want to gain bigger percentages, which can rly move fast either for you or against you.
It's a surprise that I've learned to hate...
so anyways, great post, this rly strikes home with me...so much so I'm printing it out and posting it in front of my trading desk.
