Risk Management - A Different Perspective?

Beginner Questions
1

Hello,

It may seem very strange for me to be starting YET ANOTHER thread on the subject of risk management because there are probably DOZENS of threads on the same topic but they’re mostly limited to ‘what is risk’, ‘how do I calculate it’, and it’s usually mixed up with leverage questions and arguments (and not to mention that at THIS ‘late stage of the game’ it’s not a question that I should be asking BUT you NEVER stop learning now do you) BUT something has been bothering me for a good while now. Basically: I’m coming at this from a different angle. Just bear with me while I explain (and by the way this has nothing to do with which market you are trading i.e. it applies ‘across the board’).

We all know that the ‘generally accepted risk management rule’ is to not risk more than 2% of your total capital on any single trade. Less is better of course but for some reason 2% seems to be the ‘generally accepted standard’ (on what that is based I do not know but it’s irrelevant for the purposes of this thread). No problem there.

BUT NOW think about this:

Traders will have winning streaks and losing streaks. We know this. Most traders (and myself included here) would increase their the position size as their account grows (still risking 2% of total capital on a single trade but of course 2% of a now bigger amount of total capital assuming a good few consecutive profitable trades). The caveat using this method or logic: your trade sizes get bigger (so of course on profitable trades you’ll be more profitable i.e. you’ll make more MONEY) BUT your potential losses ALSO get bigger the more profitable you become and the more total capital has increased. Now while this may SEEM to be a ‘so what’s the problem’ type of thing read on.

Think about it: let’s say you have a winning streak and you’re using the above (let’s call it) ‘linear risk management logic’. And then, for whatever reason, you go through a losing period. Using the above ‘linear risk management logic’: ‘strictly speaking’ after every loss your risk on the next trade would be less i.e. the trade size would be have to be smaller (of course: given the same trading system or methodology). The end result of this is that every successive loss would mean smaller trades and thus take far more (in number) profitable trades just to get back to where you were before your string of losses started.

(By the way and just an observation: this is one of the reasons why these theoretical Excel Spreadsheets that show the ‘power of compounding’ mean nothing. You know the ones I’m talking about??? Where the trader starts with $1 000 and compounds, say, a 10% gain per month on average, and is a millionaire in a few short years!!! My opinion anyway.)

Now I found an interesting ‘take’ on this in a book called ‘Technical Analysis of the Financial Markets’ by John J. Murphy (yet another old book but, as always, still relevant). Not using the exact figures (they’re irrelevant) but his basic premise is to DECREASE risk after profitable trades and INCREASE risk after losing trades (of course not exceeding your 2% risk of total capital per trade). Alright there’s a lot more in his explanation but that’s the gist of it.

In addition: I’ve heard it said (I’ve no experience in the matter so I’m unsure as to how true this is but I’ve heard it more than once) that the ‘key to success’ for a professional, say, poker player, is to bank half their profits and to never touch those profits. Could this be true and, whether it is or not, could this be a ‘wealth building strategy’ in THIS business???

I’ve, previously, read a lot of other articles and books on the subject (Larry Williams for one has one VERY complicated risk management or should I say ‘wealth management’ regimen described in one of his books but I’ve never bothered with it) but up until now I have pretty much stuck to the ‘linear risk management logic’ (as noted above) i.e. increase your trade size after a profitable trade and decrease your trade size after a losing trade (in other words your AMOUNT risked, not percentage risked, but AMOUNT risked will differ after each trade) but after reading (the portion of) the book mentioned above something ‘clicked’ that made me think about this.

Anyway: I’m just interested in some other peoples ‘take’ on the subject and what they’re doing in this regard.

Regards,

Dale.

2

Hello, Dale

Your post touched on a number of related topics. I will comment on three of them: strings of losses, banking a portion of profits on a regular basis, and the idea of increasing/decreasing risk after losing/winning trades.

[B]1.[/B] I’m not sure what point you are making about strings of losses.

All else being equal (a sometimes dangerous hypothetical disclaimer), strings of losses have a statistical probability of occuring which depends on just one metric: the win-ratio of the system in question. For example, if a trading system has a consistent win-ratio of 70%, meaning that over time 7 out of 10 trades are profitable, then a nifty mathematical formula can tell us the probability that a string of losses of any given length will occur. I won’t bog this post down with a math derivation, or with examples. Here’s a previous post of mine, where I did all that — 301 Moved Permanently

Given the fact that strings of losses will occur in a probabilistic fashion, regardless of any past history, how can strings of losses figure into a risk management plan? In other words, if my system has just produced a string of [B]winners[/B], and I know that the probability of a string of, say, 8 losses in a row is exactly the same [B]after[/B] the string of winners as it was [B]before[/B] the string of winners, how does any of this imply that I should change what I’m doing?

In my view, knowing the probability of a string of losses might strengthen my resolve when one of those strings hits — at least, I won’t fall victim to the idea that the market is out to get me.

And depending on the probability [B]or improbability[/B] of a particular string of losses, I won’t [B]automatically[/B] assume that my system has stopped being viable.

[B]2.[/B] I definitely advocate banking a portion of profits on a regular basis.

Some time ago, I wrote about the power of compounding (which you seem to dismiss), and as part of a hypothetical example I included in my calculations quarterly withdrawal of one-half of profits from the trading account. Here is a link to my previous post — 301 Moved Permanently

A profitable trader must withdraw a portion of profits periodically just to pay taxes. A profitable trader who supports himself by trading must also periodically withdraw the funds needed to support his lifestyle. And a profitable trader, whether self-supporting or not, should make withdrawals on a sensible schedule to accomplish two other objectives: (1) get back every dollar ever deposited into forex trading, so that all future trading is done with OPM (other people’s money), and (2) completely remove a portion of forex profit from forex risk — in other words, diversify some of those hard-earned forex profits into different (and preferably less risky) investments elsewhere.

[B]3.[/B] As for increasing (or decreasing) risk after a losing trade (or a profitable trade), maybe I’m missing the concept altogether, but I just don’t get it.

The previous trade, or ten trades, or one hundred trades, cannot possibly predict the outcome of the next trade. To adjust one’s predetermined risk based on the result of one’s last trade seems more emotional than rational to me.

If there is some insight here that has escaped me, please tell me more.

3

Hmm, I think it is almost related to probability theory. I think both of you are right. The point is, even if almost everything in markets is related to probability theory, not everything is. The markets have a fat tail. So, they are not 100% like a gaussian standard development would predict. That’s why the outcome is not random, not chaotic, not deterministic - it is all together. We have random noise in the markets, generally chaotic behavior and at least a component of deterministic moves.

My backtests show that gambling tricks don’t change anything regarding risk-reward factor in the long haul. You may get a higher profit at one time and a higher loss at another. However, letz say you have a system with 80% winners as I have, and you had say two losses in a row and a winner afterwards, if you would like to increase the leverage anyways, that would probably be the best time to do it. Because of a high winning rate and a less probability that you have three losses in a row. Not because of the last trades. I would however not generalize this, so I would do this just once and not on every two losses. Just if I had in mind to increase the leverage a bit anyways.

4

Hello you two.

Thanks for the input and opinions thus far. It’s a bit late here so I’ve had a cursory read of your posts (I spent a good portion of the day rearranging my ‘office’ so I just logged in now to make sure everything is working and, well obviously it is, and saw your responses).

Tomorrow morning I’ll analyse what you’re saying and I think I’ll include that information that I found in that book mentioned for you to take a look at.

You guys still have the day (or most of it if I’m not mistaken) ahead of you so ponder upon this:

I guess ‘in short’ (something that’s difficult for me to accomplish as you know) what I’m saying is that if you adhere to what I referred to (above) as '‘linear risk management logic’ (just a phrase I came up with): is it not possible that one could close out ten consecutive profitable trades but using the same ‘linear risk management logic’ it may take you only four consecutive losing trades to be right back to the point where you started (alright I’ve not done the math so those are probably not the correct figures but I’m just trying to make a point).

I’m by NO means discounting the power of compounding. I was just mentioning it because of a lot of new traders will draw up a spreadsheet using what I referred to as ‘linear risk management logic’ couples with compounding and not take into account that even although ON AVERAGE they may be ‘good’ for 10% per month return on capital what’s normally NOT realised or taken into account are those infamous ‘tables’ (I’ve posted one or two in my time) where a certain percentage of loss requires a certain greater percentage of gain just to break even let alone surpass break even and end the month (period) with your 10% goal. All I was saying about the spreadsheets and compounding is that it’s not quite as simple and ‘linear’ as one can be fooled into believing it is. But that was just a ‘sidenote’ i.e. nothing to do with the ‘nitty gritty’ of what I’m getting at here.

I suppose I could put it (my original query) another way:

What ‘recipes’ are there for a trader to trade, build up their trading account (with compounding), while at the same time [B]building wealth[/B]. They’re not the same thing. We’ve all heard the stories of floor traders who’ve been at this game for thirty years and then all of a sudden ‘bang’. They’re broke. Over those thirty years they successfully built up their trading capital (and alright of course they had to withdraw money to pay bills and for entertainment and for whatever else) but they’ve ended up with nothing because the [B]wealth building[/B] aspect didn’t ‘feature’. I hope that makes more sense of my first post.

Edit:

Sorry just to explain your point 3 Clint. What I’m getting at is (as an example): you start with $10 000 in capital. You have elected to risk 5% of your account on your first trade. That trade is profitable. Let’s say it makes $1 000 in profit. So you now have $11 000 in trading capital. You stick with your your 5% so your risk on the next trade will be 5% of $11 000 (and so on and so forth). Now take it the other way. You start with $10 000 in capital. You have elected to risk 5% of your account on your first trade. But THIS trade is a loser. Now you only have $9 500 in trading capital. Stick with the 5%: your next trade size has to be smaller (and so on and so forth). That was the point I was trying to make.

Regards,

Dale.

5

Good morning,

Attached is an excerpt from the book (the part about Money Management that starts at the bottom of the first page in the .PDF).

Take a look and maybe what I was asking or saying is clearer.

After some additional thought on the subject I would go so far as to say this: if you started trading twenty years ago and took a $10 000 account to, say, $1 000 000 (pick your own ‘top’) that does not necessarily mean that you’re a wealthy man IF all your liquidity (cash) is still sitting in your trading account. Sure: you will have accumulated assets etc. along the way BUT you need to maintain those assets and service whatever other debts you may have incurred along the way and ‘live’. Also: one cannot trade forever (well alright: that one I’m not TOO sure about i.e. I’ll probably die with a chart open in front of me but I’m sure you’ll get my point)!!!

But alright: much of the excerpt (and what I’ve said above) is not DIRECTLY related to the point I was trying to make in my first post. It’s the parts about what to do about position sizing and capital etc. etc. etc.

Regards,

Dale.

Excerpt - Money Management.pdf (273 KB)

6

Yes, if on average your losers are 2½ times the size of your winners. It’s not [I]impossible[/I] for a successful trading plan to have such metrics. But, most traders aim for a system in which the winners are larger than the losers, and the winners outnumber the losers. Because big losses stink, even if they are rare.

Trading income is no different from any other sort of “variable” income — say, commission sales — in that the person receiving the fluctuating income has to use the peaks in income to ride out the troughs in income.

A commission salesperson may be offered a “draw” against commission, as a way of evening out the fluctuations in monthly earnings. But, we self-employed forex traders have to fend for ourselves.

Anyone, with any style of income, must budget for living expenses and savings/investment. A salaried employee who spends every dollar earned is doing nothing to build wealth. That person isn’t necessarily living hand-to-mouth — depending on the size of the income being earned and spent, that person may be living high on the hog (as they say in the country). But, he nevertheless is building zero wealth. A self-supporting, professional trader is no different. Providing for one’s future (building wealth, as you put it) is an adult responsibility.

In my previous post, I linked to a [I]still-more-previous[/I] post where I gave an example of compounding the profits in a trading account. That example included a withdrawal plan designed to cover taxes, living expenses, business expenses and savings. It seems to me that the answer to your question is right there: a portion of profits should be withdrawn from the trading account, and invested in different (and, ideally, safer) instruments.

How could it be otherwise?

As the account balance grows, the 5% maximum risk figure becomes a larger dollar-amount. As the account balance declines, the 5% figure becomes a smaller dollar-amount. If a trading methodology has a positive expectancy, total profits (over a statistically significany period of time) will exceed total losses, and the account will grow.

You take a trade, strictly following your system rules. You have no way of knowing whether that trade will be a winner or a loser. If you knew the trade was going to be a winner, you’d go all in. And if you knew the trade was going to be a loser, you simply wouldn’t trade. But, you don’t know. So, you have no rational basis on which to adjust your trade risk.

7

Because most people don’t get the notional idea of reverse compounding.

I’ve seen lots of examples of continued losses based on initial deposit.

8

Good morning.

Clint:

Thanks for that. To be honest: I guess your ‘goals and timeframes’ post kind of ‘says it all’ really insofar as [B]wealth management[/B] is concerned (maybe that’s what the title of this thread should have been)??? I guess I was just a bit intrigued when I read that chapter on money management in that book. But I think I’m going to look a bit deeper into this issue. I’d be interested to know how many people have a [B]wealth management[/B] plan and not just a trading plan (if that makes sense). As you noted in that post (and as I’ve noted here and probably could have saved myself a lot of time had I seen that post of yours before starting this thread): withdrawing 50% of your profits per quarter is a [B]wealth management[/B] plan (in my opinion) and it’s not something that’s ever crossed my mind until I read that chapter in that book and it kind of ‘made me think’. While I may be doing fine now insofar as trading is concerned: [B]wealth building[/B] is not something that had crossed my mind until I read that chapter in that book (and now your post i.e. maybe YOU TOO should write a book)!!! LOL!!!

The position sizing thing as noted in that book I need to take another look at though and do a bit of math although after some careful thought I’m surmising that increasing trade size after a profitable trade (and therefore an increase in trading capital) and decreasing trade size after a losing trade (and therefore a decrease in trading capital) would sort of ‘even out’ over the trading period.

I’m not trying to complicate things here (PurplePatchForex always tells me I THINK too much) but for some reason that chapter in that book got me to THINKING about things I’ve never bothered to THINK about before!!!

HERE is a question though:

How do YOU (or anyone else) calculate your position size or manage risk with multiple positions??? In other words: let’s start ‘from scratch’ (it’s easier). So a trader deposits $1 000 and open his first trade risking 2% on the trade. Let’s say that his first trade turns to a loss (but has not yet been stopped out). His EQUITY therefore is his $1 000 minus the current loss on the open position. Now he gets another signal for another trade on a different instrument. On which value does he base his risk on the next trade??? Initial deposit (in this case as it’s a new account) or his EQUITY at the time??? Again: just wanting to compare notes from what I do (I base every new or additional trade on account balance not on EQUITY at the time of opening another trade).

But thanks again. As was noted in that other thread where you posted: there’s more to this business than simply trading and having a trading system that works and I don’t think there are many people that think about that (I know up until now I myself have not hence my starting this thread which admittedly ‘went all over the place’ as is usually the case with my threads started of late)!!! LOL!!!

Master Tang:

I’m pleased you made that point so succinctly (‘fancy word’ that)!!! LOL!!! I’ll bet THAT post is going to give many people something to think about!!!

In closing: here’s something interesting that I was sent yesterday coincidentally (from TraderPlanet) by good 'ol Von Tharp. It’s sort of ‘on topic’ really. An interesting read anyway.

Synergistic Trading (entitled ‘Know When to Really Bet Your Hand’).

Regards,

Dale.

9

Some good info in this thread:) Do any of you tough fx pros risk more then 2% per trade? Say 5%? I know .5-2% is pretty much the advised amount per trade but i was wondering if some REAL traders might risk a higher percent as they build their account and then slowely change to a more conservative approach as they move to protect their profits. Maybe change to a wealth building plan as apposed to just milking the cash cow so to speak.

10

It all depends on your trading style. If you trade only a few times and you have a probability of high success with low drawdowns, plus you are disciplined like a bot then more than 2% is completely sane. I would however not suggest any newbie to rise a risk of a trade above 2%. Plus I’d recommend to leave that always below, so that it becomes lower if the account melts. This way you can trade a lot longer, learn a lot more and maybe become break even until you find something what makes money consistently. I guess most blown accounts have the reason in the fallacy that the gambler thinks the probability of a jackpot rises the longer the string of losses lasts.

11

10 trades lossed in a row from 1000$ results:

trades/Risk 1% 2% 3% 4% 5% 10%
1 990,00 980,00 970,00 960,00 950,00 900,00
2 980,10 960,40 940,90 921,60 902,50 810,00
3 970,30 941,19 912,67 884,74 857,38 729,00
4 960,60 922,37 885,29 849,35 814,51 656,10
5 950,99 903,92 858,73 815,37 773,78 590,49
6 941,48 885,84 832,97 782,76 735,09 531,44
7 932,07 868,13 807,98 751,45 698,34 478,30
8 922,74 850,76 783,74 721,39 663,42 430,47
9 913,52 833,75 760,23 692,53 630,25 387,42
10 904,38 817,07 737,42 664,83 598,74 348,68

% win to breakeven: 11% 22% 36% 50% 67% 187%

12

Hi,

And thank you jpbed for taking the time and going to the trouble to post that ‘table’.

I’ve done some ‘cursory’ testing of my own and all I’ve managed to prove is that using (what I referred to as ‘linear risk management logic’) you have to have a better than 1:1 risk/reward ratio to be profitable so now I’m not quite sure what this guy (who wrote the book to which I was referring) is ‘on about’. All I did was take a starting capital of $1 000, risked 2% per trade, obviously my profit target was equal to the amount risked, and assumed 10 profitable trades in a row and then did the same in reverse i.e. assumed 10 losing trades in a row losing 2% of account balance after each trade. With a 1:1 risk/reward ratio you end up at JUST below breakeven (but of course that excludes spreads and commissions etc.). So I’m not QUITE sure what this guy (who wrote the book to which I was referring to) is ‘on about’.

But I fear that what I’m trying to ‘prove’ or ‘disprove’ or ‘satisfy myself with’ is more difficult if you are a trader like me that does not use profit targets i.e. my profit targets are dictated by the trading systems themselves. In other words on one particular profitable trade (after it’s closed out) my risk/reward ratio could have been 10:1 while on another profitable trade my risk/reward ratio could have been 4:1. That type of thing.

Come to think of it: I’m not sure why this ‘struck a chord with me’ AT ALL as I type this!!! LOL!!! But there WAS a reason and I’m sure at some point in time it will ‘come back to me’!!! LOL!!!

One thing I MYSELF would like to know is: where did this ‘de facto standard’ of only risking 2% per trade come from anyway??? Is it based on anything mathematical or statistical??? I’m just curious. I mean to say: I’ve just accepted it and always ‘advise’ or ‘advocate’ it but at least two (new) traders have asked me the same question on my forums and I actually don’t have the answer (which WAS INDEED my answer to them i.e. ‘I have NO idea’)!!! LOL!!! I’m not saying it’s WRONG. I’m just wondering about its origins. I mean why not 1% or 10% or 6.36458%???

Regards,

Dale.

13

Some very insightful posts… thanks for a good read Dale and Clint.

I’m not sure there is a right or wrong way of doing this but tend to favour Clint’s approach. Personally I run with ‘linear’ account building and the reverse with drawdown. The 2-5% risk is a construct of retail trading. I remain convinced this is simply a way to increase the commision revenue of brokers who suggest 2-5% of account per trade. In broker webinars, instructers still suggest 5%. In practise institutional traders risk a fraction of 1%. Personally (as you know) my risk is 0.1% (as a lot size) per trade, no exceptions. Addressing the point you raised Dale about risk v multiple positions and or instruments, I will open a second trade and so on only when I have moved my stop inside a profitable trade thereby keeping my risk the same but entering additional trades. Example short EU @ 1.4273 and stop now inside the trade and looking for another… any ideas? :60:

If one is to make a good living trading then my ten cents would be to grow an account to 200k using ‘linear’ compounding then draw off all profits from there. Even using a very modest trade risk its good for 10k a week with a proven strat. Of course you could leave 50% to continue the compounding if you really want to become the next GS! LOL!!!

14

Hello,

Nice to ‘hear’ from you. (Don’t you read your e-mail i.e. I sent to you a ‘birthday wish’ the other day i.e. as I said in the e-mail: Facebook does have its uses)!!! LOL!!!

Thanks for that.

As you know I ‘bang on’ to anyone who will listen as to the importance of money and risk management because of my bitter experience which was DIRECTLY attributable to NO money and risk management at the time. It’s definitely the ‘make or break rule’ in this business. It’s just that when I read that chapter in the book referred to I started ‘thinking’ and ‘questioning’ (as a rule: not normally a good thing for me to do)!!! LOL!!!

Anyway: after starting this thread I’m still not entirely sure what the guy was ‘on about’. But I must say that I like Clint’s idea of taking profit and ‘banking’ (50%??? of) it every quarter (it’s not something I’ve ever thought of doing so if nothing else my reading that chapter in that book has had SOME benefit). We all (well I as in ‘ME’) have just had the notion that you put money in your trading account and just keep trading ‘until the cows come home’ withdrawing your ‘needs’ when necessary. But (and I never EVER thought I’d be saying something like this): I’ve never been one that looks to the future but WHAT IF for SOME reason (‘things’ do and can happen) you were unable to trade to for week or two or a month or worse??? I mean to say: if for some reason I ended up in hospital I’d borrow a notebook from someone and trade from my bed (unless I was in a coma of course and even then I’m sure I’d be thinking of charts)!!! LOL!!! Only joking but it’s something to think about and something I’ve never thought about up until now. At my age (which as you know is 46) there are no more ‘second chances’. In other words: trading being my sole source of income ‘is it’. It’s the only chance I have of NOT ‘ending up on the street’ when I’m old (when most people would be able to retire with a pension fund). At my age: even IF I got ‘fixed employment’ there are not enough years left to pay into a pension fund that would grow to a point where I’d be able to survive once I had to stop working. Do you see what I’m saying??? So now I’m (starting to anyway) think about THEN and not just about TODAY or TOMORROW. What ‘brought it home to me’ was the fact that my father (who turned 83-years old in April) looked VERY ill earlier this week. But he’s worked all his life and contributed to a pension fund and although (as is usually the case) for all the years and money he’s put into a pension he’s been ‘nailed’ i.e. the amount of money that he gets paid as a pension is nowhere NEAR what he was earning up until his last salary amount but at least it’s something. Put another way: after my ‘spectacular wipeout’ had it NOT been for his pension we WOULD have been ‘out on the street’. No question about it. And it got me to thinking: I’m still a LONG way off from being ‘back’ to where I was six or seven years ago (financially) since I started trading (it seems like ‘yesterday’ to be honest). So ‘putting it all together’: if anything happened to him it would be down to me and my trading account and, well, like I said what IF ‘something’ happened and for some reason I couldn’t trade??? Or what IF my ‘broker went broke’ (alright OBVIOUSLY this would NEVER happen to my beloved Deltastock but the rest of you THINK ABOUT WHAT I’M SAYING)!!! LOL!!! (Yes: that was a very ‘weak punt’ I know)!!! LOL!!! But actually and come to think of it: remember that even WITH a reputable and regulated broker compulsory (because of regulation and why you should be trading with a reputable and regulated broker like Deltastock) (now THAT was a ‘better punt’!!! LOL!!!) fidelity insurance only covers your trading account up to a certain amount. In other words: if the fidelity insurance only covers the trader for, say, £500 000 and you have £2 000 000 sitting in your trading account and ‘something’ happens to your broker??? Well: you’re £1 500 000 ‘down’ ‘in an instant’ ‘right there and then’.

Anyway: I suppose (YET AGAIN) I digress. Although I NOW don’t understand what the guy (who wrote the book) is ‘on about’ I DO know that other than Clint’s posts (on what I would call ‘thinking ahead’ or ‘building wealth’) I’ve not seen stuff like the above being discussed or even thought about on any thread on any forum. Maybe this will get people to ‘thinking’ (of course: we ASSUME CONSISTENT PROFITABILITY here otherwise this discussion is purely academic)!!! LOL!!!

And just something else to think about (for INVESTORS not TRADERS): as I type this post DID YOU KNOW that the S&P has wiped out ALL of it’s gains (in this past week) since the beginning of this year!!! So if you were an INVESTOR with the ‘buy and hold’ mentality (‘strategy’???) and had NOT taken 50% of your gains at the end of the first and second quarters then RIGHT NOW you’d be at breakeven (and probably not even there either because of fees etc. etc. etc. and THAT before today’s jobs numbers come out)!!!

And by the way: ‘GS’ (I assume you were referring to Mr. Soros) is pulling out of the hedge fund business at the end of the year and is only going to manage his own funds (apparently due to the fact that he’s just ‘had enough’ of all of the rules and regulations and constraints and costs that go with managing hedge funds now). That’s just a little bit of a ‘tidbit’ that may interest some.

Anyway: I know we’ve (I’ve) gone from querying risk and money management and compounding techniques to ‘thinking of the future’ and ‘wealth building’ but, well, this ‘stuff’ has at least got ME to thinking and hopefully will be of benefit to others.

Regards,

Dale.

15

i never use stop loss, i calculate how much i can handle losses then use maximum qty, so my stop loss is my margin call…
but yes, that is bad risk management… i lose almost all my money…
i think i have to learn how to manage my risk now… =="

16

I think that would be a good idea!!! LOL!!!

Your ‘method’ that you’ve been using has been discussed before a few times. It COULD work at a REPUTABLE broker (but only THEN in a NON-volatile market). But a ‘bucketshop broker’ will ‘slip’ your margin call (if that makes sense) so that you could lose EVEN a good portion of the amount that was reserved as margin (which you THOUGHT you’d retain if you were margin called). I’ve seen it happen!!!

Regards,

Dale.