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-----Original Message-----
From: A.J. Carisse [SMTP:carisse@xxxxxxxxxxx]
Sent: Saturday, May 30, 1998 12:05 AM
To: Omega List
Subject: Re: Trading Advice
Manning Stoller wrote:
> Dear Stan,
>
> I'm sure you mean well when you advise to "limit yourself to a specific
dollar
> risk on every trade" but I think that may be one of the worst things to
do.
Yes and no. There are two sides to this of course - determining the proper
exit
point with a trade, and determining the maximum one wishes to lose. I
agree that
arbitrary stops and targets are ill advised, due to their lack of real
connection
with the play, but one *still* may wish to set a maximum figure that he or
she is
prepared to lose on a single trade. One can then tailor one's trading
style and
selections to suit this, although always keeping in mind that this figure
is a cap,
and should not be the determining factor for exactly when an exit should be
taken.
That's the key. Learning to tailor your entry points based on how much you
can afford to loose. This is what is referred to as a low risk/high reward
situation. If the market's too far above an obvious point of support, then
it's a high risk/low reward situation, you would have to risk more than you
could afford to loose and you would probably pass on that trade. There are
too many other markets out there with better odds.
This becomes a little less simple with dynamic exit points (i.e..
conditions that
are dependant on ongoing performance). Still, one can easily develop a
good idea
of what can be expected from the particular method that is used.
Regards,
A.J.
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