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Chuck LeBeau wrote:
> Regardless of whether you trade systematically or use discretion price
shocks
> should be avoided.
Chuck baby! If we knew when they were coming they wouldn't be "shocks"!
Please let me know the next time one is coming so I can avoid it...
----- Original Message -----
From: <CRLeBeau@xxxxxxx>
To: <omega-list@xxxxxxxxxx>
Sent: Friday, July 23, 1999 3:59 PM
Subject: Price shocks and money management
> Regardless of whether you trade systematically or use discretion price
shocks
> should be avoided. The issues are capital preservation and risk control.
> These issues override systems and market opinions.
>
> In the long run the outcome of price shocks is random. It only seems that
> the shocks always go against us. If we ignored all potential price shocks
we
> would have the same result as if we went flat for all potential price
shocks.
> The point is that ignoring the potential shocks increases the risk with
no
> benefit and going flat or hedging the potential shocks reduces risk with
no
> loss of profit. The correct choice is obvious.
>
> Systems should not be overridden for directional or timing purposes but
they
> should be overridden when it comes to issues of risk control. The highest
or
> worst risk is the risk that cannot be quantified. These risks should
> definitely be avoided regardless of your trading style.
>
> Assessing many elements of risk is possible on a systematic basis but it
can
> never be foolproof. If the discretionary assessment is that the risk is
> unknown or unacceptable then the system should be overridden.
>
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