Time Crunch Trading

Any discussion of trading must include the topic of risk. It is risk, or rather the misunderstanding and misapplication of it, that most often trips up new traders, preventing them from ever becoming old traders.
As in any other part of life, you have to be prepared to face a negative to be able to achieve […]

We mentioned the topic of risk tolerance earlier. Before you can properly outline a meaningful risk or money management strategy you first have to understand and define your personal risk tolerance. Some people are naturally risk-averse. They will tend to only feel comfortable exposing small amounts of their portfolio to the potential for loss. Others […]

You may be wondering at this point why all this matters if high returns are the overall objective. Shouldn’t we just accept any size drawdown so long as the total returns in the end are good?
That all sounds well and good, but it does not take in to account several important factors.  The first is […]

You will sometimes come across the concept of Risk of Ruin (RoR) in discussions of risk management and trading system evaluation. Simply stated, the RoR is the chance of blowing out your account. Each of us has a different idea of what exactly that means, so the RoR will vary from trader to trader.
For example, […]

An important factor to keep in mind when determining your per trade risk and defining other factors in your money management scheme is trade frequency. That is tied in with your timeframe.
Generally speaking, those with shorter trading timeframes will make more trades over a given span. Someone doing daily market analysis, after all, is going […]

The probability of loss on any given trade is most often assigned to the timing of position entry and exit. That is a function of the trading system or methodology employed, which will be discussed later. Predicting the market return of any given period, even in a binary up/down fashion, is a difficult proposition at […]

Money management can be much more involved than just defining the risk of a
specific trade or position. As a part-time trader you will probably be best off
if you stick to just a single open position at a time. The more trades you have
on, the more time you will have to commit to monitoring and managing […]

The idea of risk or money management for the trader is inherently a negative one. This can be a very unusual situation for those who are used to thinking in positive terms. Nevertheless, it is important to approach your trading in the proper manner.
It is very easy to get caught up in fantasizing about big […]