Comments on: Risk Management http://ivanhoff.com Reaction to news is more important than news itself! Thu, 29 Jul 2010 13:15:16 +0000 hourly 1 http://wordpress.com/ By: Market philosophy, strategies and tactics « Ivanhoff Capital http://ivanhoff.com/risk-management/#comment-139 Market philosophy, strategies and tactics « Ivanhoff Capital Fri, 30 Apr 2010 02:23:47 +0000 http://ivanhoff.wordpress.com/risk-management/#comment-139 [...] Risk Management [...] [...] Risk Management [...]

]]> By: ivanhoff http://ivanhoff.com/risk-management/#comment-63 ivanhoff Sat, 31 Oct 2009 02:08:37 +0000 http://ivanhoff.wordpress.com/risk-management/#comment-63 Other posts on the subject: Cutting losses There are two types of traders: the ones that cut losses short and the ones that lose everything and go out of business. If you can’t define your risk in advance and most importantly if you can’t accept it, you should not be trading at all. Reading about cutting losses short will never be enough. It is human to believe that you are different and that you know better and that it will never happen to you. You have to experience it to realize it. It is part of the learning curve. I knew about this rule long before I committed serious money to trading and yet I didn’t practice it until I had my portion of outsized losses. Today, the thought of how and where I’ll exit a trade, is the most important……: http://ivanhoff.com/2009/06/11/cutting-losses/ About tight stops Being right and being profitable in trading are two very different definitions. You could be right in 90% of your trades, making a $1 per share. Then you could be wrong on the 10th trade and lose $10 per share there. The final result is -$1 per share from all the ten trades. Percentage of winners is not what traders should be paying attention to….: http://ivanhoff.com/2009/06/08/about-tight-stops/ Eckhardt on taking profits "One common adage on this subject that is completely wrongheaded is: you can't go broke taking profits. That's precisely how many traders do go broke. While amateurs go broke by taking large losses, professionals go broke by taking small profits. The problem in a nutshell is that human nature does not operate to maximize gain but rather to maximize the chance of gain. The desire to maximize the number of winning trades (or minimize the number of losing trades) works against the trader. The success rate of trades is the least important performance statistic and may even be inversely related to performance." Eckhardt on losses "The people, who survive, avoid snowball scenarios in which bad trades cause them to become emotionally destabilized and make more bad trades. They are also able to feel the pain of losing. If you don't feel the pain of a loss, then you're in the same position as those unfortunate people who have no pain sensors. If they leave their hand on a hot stove, it will burn off. There is no way to survive in the world without pain. Similarly, in the markets, if the losses don't hurt, your financial survival is tenuous." Losses happen and they are part of our trading education, but they are always bringing a message with themselves. If you don't learn anything out of them, it is money wasted. Always ask yourself: what did I learn form that loss? What could I do, not to repeat it again. Other posts on the subject:

Cutting losses
There are two types of traders: the ones that cut losses short and the ones that lose everything and go out of business. If you can’t define your risk in advance and most importantly if you can’t accept it, you should not be trading at all. Reading about cutting losses short will never be enough. It is human to believe that you are different and that you know better and that it will never happen to you. You have to experience it to realize it. It is part of the learning curve. I knew about this rule long before I committed serious money to trading and yet I didn’t practice it until I had my portion of outsized losses. Today, the thought of how and where I’ll exit a trade, is the most important……: http://ivanhoff.com/2009/06/11/cutting-losses/

About tight stops
Being right and being profitable in trading are two very different definitions. You could be right in 90% of your trades, making a $1 per share. Then you could be wrong on the 10th trade and lose $10 per share there. The final result is -$1 per share from all the ten trades. Percentage of winners is not what traders should be paying attention to….: http://ivanhoff.com/2009/06/08/about-tight-stops/

Eckhardt on taking profits
“One common adage on this subject that is completely wrongheaded is: you can’t go broke taking profits. That’s precisely how many traders do go broke. While amateurs go broke by taking large losses, professionals go broke by taking small profits. The problem in a nutshell is that human nature does not operate to maximize gain but rather to maximize the chance of gain. The desire to maximize the number of winning trades (or minimize the number of losing trades) works against the trader. The success rate of trades is the least important performance statistic and may even be inversely related to performance.”

Eckhardt on losses
“The people, who survive, avoid snowball scenarios in which bad trades cause them to become emotionally destabilized and make more bad trades. They are also able to feel the pain of losing. If you don’t feel the pain of a loss, then you’re in the same position as those unfortunate people who have no pain sensors. If they leave their hand on a hot stove, it will burn off. There is no way to survive in the world without pain. Similarly, in the markets, if the losses don’t hurt, your financial survival is tenuous.”
Losses happen and they are part of our trading education, but they are always bringing a message with themselves. If you don’t learn anything out of them, it is money wasted. Always ask yourself: what did I learn form that loss? What could I do, not to repeat it again.

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