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Risk management is a very important part of a trading plan.
You know your own children so you will know if they have the discipline to follow their plan.
How do you control risk without knowing how they plan to trade?
"The days when I keep my gratitude higher than my expectations, I have really good days" RW Hubbard
Can you help answer these questions from other members on NexusFi?
Based on how much they lose at a stop loss to % equity of the account. How they enter or sizing or whatever is up to them. Cap the % equity they can lose per trade, per day, per month etc.
Sounds simple enough but we are talking about inexperienced traders.
How many traders blow up because they don't honor their stops. How about revenge trading?
How do you cap the losses without looking over their shoulder?
At least with a trading plan that you have reviewed you are putting the responsibily of following the plan on their shoulders. It is easy to rationalize your actions after the fact, but if you have a written action plan it is difficult to come up with a reason for not following your own plan.
I am in agreement that capital preservation should be the number one concern. I would just feel a lot more comfortable if I knew exactly how they planned to do it.
"The days when I keep my gratitude higher than my expectations, I have really good days" RW Hubbard
It was implied i was looking over their shoulder. since i mentioned in my first post real time and daily mark to market . Set hard limits, either broker or platform wise, and alerts and your good to go. If you're doing this like a real firm then you use your risk management middle ware to lock em out and reduce/flatten their positions. pretty easy stuff to be honest.
If you don't have any of that and you get the daily report in your email like all brokers do, you see the loss greater than the agreed upon limit. The kid is fired and I pull the plug. Exactly like real life, and simple as pie.
I have had great streaks of profit days... Some of them ranging to 15 continuous winning days and that just builds up a lot of ego and overconfidence... I know sometimes 10 15 days of amazing trading days is like an imbalance and probability has to take control because if my winning percentage is 60 and I have won 10s of trades, then I guess it is a matter of time that my personality will start to see a losing streak... Say after this streak, I lost one day and that day I trade further and make it break even somehow, that pushes me over the edge because my downfall starts there. From the next day onwards, within 2 or 3 days, I lose nearly all of the profit I had from the winning streak and if only I had a nickel every time I had done this, I would be way more profitable than my current numbers....
I have total support from Mrs. PC. Course it helps when you're making forward progress in the 'ol account balance department. She agreed to put some money from savings into my trading recently, and we're talking about putting some more in next year.
