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I think it is absolutely essential that one establish an overall trading policy
which specifies a per trade risk limit (e.g. 2% of account balance). The stop
loss point for each proposed trade should be established using the appropriate
technicals, _not the risk limit_. If the stop loss for the proposed trade falls
outside the limits of the risk limit, the proposed trade should not be
initiated. The use of an overall risk limit will prove beneficial in many ways:
conserving trading capital, selecting which securities to trade, selecting time
frame in which to trade, selecting which trades to take.
Earl
-----Original Message-----
From: Manning Stoller <mstoller@xxxxxxxxxxxxx>
To: Stan Katz <skat@xxxxxxxxxxxxxx>
Cc: INTERNET:omega-list@xxxxxxxxxx <omega-list@xxxxxxxxxx>
Date: Friday, May 29, 1998 10:23 PM
Subject: Re: Trading Advice
>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.
>Using a specific dollar risk is not a viable way to trade. When you do this,
>you are assigning an arbitrary dollar amout and using it as a stop.
>Don't you think it makes more sense to determine where the market should not
>go, determine the dollar risk if it does go there and then deciding whether you
>can afford to do the trade?
>This makes a lot more sense then arbitrarily picking a dollar stop.
>
>Regards,
>
>Manning Stoller
>
>Stan Katz wrote:
>
>> I recommend the following books about trading (as opposed to technical
>> analysis): "Computer Analysis of the Futures Market" by LeBeau and Lucas;
>> "Street Smarts" by Connors & Raschke; "Trading for a Living" by Elder. If
>> you want to learn about Technical Analysis, try "Technical Analysis of the
>> Futures Markets" by Murphy. Avoid other peoples' systems; don't try paper
>> trading; and concentrate fully on how much you have at risk (and limit
>> yourself to a specific dollar risk in every trade) instead of concentrating
>> on how much you can win.
>
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