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Concerning risk per trade sizing
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Concerning risk per trade sizing

  #41 (permalink)
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Thank you...

for taking that approach and for trying to be helpful.

I do get great benefit from many of the posts here. Some are things I've been through, some are ideas or perspectives I was not previously exposed to.

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  #42 (permalink)
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How I feel when I can't get ...

my point across.



Last edited by wldman; February 21st, 2012 at 02:19 PM. Reason: fix mistake
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  #43 (permalink)
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Anyone who uses Kelly here?

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  #44 (permalink)
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Going along with tiger's last paragraph, I feel that traders all too often try to eliminate and reduce risk as opposed to trying to embrace and manage it. Powerful difference between the two.

Mike


Speaking as someone struggling to grasp this concept, I'd say that this is one of those 'things you know that have to be mastered' but which just seem awesomely difficult to do. I mean, I can talk the talk and say all this stuff too because I've heard it from enough people I respect and I believe it - but can I walk the walk?

Put another way, it's easy to be able to say 'sh*t happens' after the event, but in a position where you see that sh*t is very likely to happen right now, in-grained psychology gets in the way of the desired response. Over and over, ad nauseam.


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  #45 (permalink)
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Does that mean...

you have a propensity to kill winners and nurture baby losers till they are full grown? Not sure I follow you.

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  #46 (permalink)
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Personally right now it's a tendency to put the stop too close but it could be anything along those lines.

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  #47 (permalink)
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Adamus View Post
Speaking as someone struggling to grasp this concept, I'd say that this is one of those 'things you know that have to be mastered' but which just seem awesomely difficult to do. I mean, I can talk the talk and say all this stuff too because I've heard it from enough people I respect and I believe it - but can I walk the walk?

Put another way, it's easy to be able to say 'sh*t happens' after the event, but in a position where you see that sh*t is very likely to happen right now, in-grained psychology gets in the way of the desired response. Over and over, ad nauseam.


It's exactly as hard as you make it.

Another idiom you may often hear is "Traders get exactly what they want out of the market".


Quoting 
traders all too often try to eliminate and reduce risk as opposed to trying to embrace and manage it. Powerful difference between the two

So how to actually do this? Just analyze your behavior. Of course, you have to be honest with yourself, which is near impossible for most (they always find some external cause to explain something). But if you can be honest then you can clearly identify trends and behaviors within your approach.

Do these tendencies include trying to eliminate risk? One such example might be to move a stop up for no reason (no market based reason). Another is moving a stop to breakeven, again for no real reason other than to satisfy some personal demon (the market didn't give an indication that moving the stop was warranted).

Or do you embrace risk? Traders are risk takers. Your goal is not to be risk averse. Your goal is to manage the risk, expect the risk, embrace the risk. Sometimes this means what you want to do is take the trades that many others would not take because it is outside of their comfort zone. It does not mean that trade risks 10% of your capital! It means that you need to know that "fat tails" and "black swan" events happen. News happens. You don't know what tomorrow will bring, so in essence it all boils down to "expect the unexpected".

If you can literally come to expect the unexpected, then you will not be caught off guard or severely damage your account when such an event happens. And it will.

I find it really helps to take a step back. Stop trying to scalp the market for ticks and load up some bigger charts. Switch to micro sized instruments if you need to, but get away from all the noise and focus on the bigger moves from day to day or week to week. Until you do this, things will likely only be confusing.

Once you are proficient at trading bigger charts profitability, then you can trade around those positions on smaller time frames.

Mike

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  #48 (permalink)
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It's exactly as hard as you make it.

Another idiom you may often hear is "Traders get exactly what they want out of the market".

That's Ed Seykota. Another one of those pearls of wisdom I talk but can't walk. Man I sound like a schizophrenic.


Big Mike View Post
I find it really helps to take a step back. Stop trying to scalp the market for ticks and load up some bigger charts. Switch to micro sized instruments if you need to, but get away from all the noise and focus on the bigger moves from day to day or week to week. Until you do this, things will likely only be confusing.

Once you are proficient at trading bigger charts profitability, then you can trade around those positions on smaller time frames.

I could do that, and with forex it's really easy to scale down. But I'm not sure I should. I haven't decided that progress has halted yet with my 3-min timeframe trading strategy - I'm just saying the curve is still steep.

You can discover what your enemy fears most by observing the means he uses to frighten you.
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  #49 (permalink)
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Adamus View Post
That's Ed Seykota. Another one of those pearls of wisdom I talk but can't walk. Man I sound like a schizophrenic.

Not to venture too far , but again I believe this is really rather simple to understand or "get". Now it isn't as simple to execute. But here is what I found most people understand easily: Step back 100 feet from your life. Look at your life as though you are looking through someone else's eyes, or your mind's eye, or whatever you want to call it.

For me (I talked about this for 3 hours in my "weekend with big mike" webinar), I had some major problems in my life that were obstacles to my success as a trader. I had to really change from the inside out. It isn't about taking signals on your chart. No amount of willpower or determination is going to make you a better trader if you have too many unresolved issues or baggage surrounding you.

So just imagine who you are trading against. Hundreds of thousands of people. Some are clueless people in their underwear, and others are billionaire professional traders. You need to beat the majority of these guys to make a profit. Are you up for it? Is your life in order so that you can truly focus on yourself as a trader? Are you really at peace with everything else in your life? Or are you "forcing it"?

Another recent example I gave was a good one I thought. You can have Tiger Wood's clubs, caddy, hat, clothes, shoes, balls, tees, and even Tiger himself standing six feet away from you. But no amount of willpower or determination alone is going to allow you to beat Tiger at golf.

Now the tricky thing is of course that you may sink a putt here and there that Tiger misses. But it doesn't mean you are a better golfer than Tiger. A lot of people get hung up on this, they hit home runs and think they are invincible and then blow up not long after, when really truly they had no better than 50/50 odds on any given trade.

Mike

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  #50 (permalink)
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I'll check it out. Sounds useful (the webinar). Thanks. (Button's gone - can't give you any more for now!)

To get back on topic, my strategy does not allow me to risk more than 1% per trade - that's 0.5% per half position, (the two halves have different targets).

So for my chosen position size, say on a $20K account size I can risk max 0.2K per trade, which is 20 pips @100K position size. So if my setup won't work unless the stop is more than 20 pips away from the entry, I don't trade.

Fortunately it's only in the most volatile conditions that I would want to put a stop that far away and so far my strategy just says stay out during those times.

In the rosey future where I go live with that position size and double my account size, I won't necessarily double my position size. My strategy calls for the smallest significant increases in position size to be proven psychologically before I am allowed to raise it again - i.e. consistency and profitability at that position size.

You can discover what your enemy fears most by observing the means he uses to frighten you.

Last edited by Adamus; February 21st, 2012 at 06:23 PM.
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