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Re: Trading Advice



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At 8:12 AM -0600 5/30/98, Earl Adamy wrote:

>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.


It seems to me that there are two stop points:

    > The point where it becomes apparent that your original
      premise for entering the trade was wrong. In this case,
      the logic of the system should get you out.

    > The point where if you continue, you will lose more money
      than you can afford to lose.

You should be able to determine each point in advance of entering the
trade. Then, if the first stop point is further away than the second, you
should not enter the trade.

If this condition happens frequently, you are trying to trade the wrong
market for the amount of capital you have.

Bob Fulks