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In a message dated 6/12/00 2:52:37 PM Pacific Daylight Time,
byoneoka@xxxxxxxxxxxxx writes:
<< in summary, it seems to me that risk management fundamentally means to take
fewer risks when the market risk environment worsens or can dramatically
worsen shortly--particularly in drawdowns because that may be the beginning
of a dramatic shift against your favor. >>
Brad,
I think that you and I are very much on the same page.
However, I'm in favor of taking small risks all the time and I have a problem
with those variable position sizing strategies that cause us to take too much
risk when we are on a temporary winning streak.
Fortunately as traders our odds are not fixed as in gambling so we can
sometimes have big winners with small bets or small winners with big bets.
If we are making a very small bet to begin with, there is little to be gained
by reducing the bet size after a losing streak. This tactic will only
inhibit our recovery. However, if we are betting too much simply because we
have been winning for a while then it is imperative that we reduce our bet
size.
I enjoyed your post. Very informative and right on target. Thanks.
Chuck LeBeau
traderclub.com
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