Why I do not do risk management and never will.
Mis à jour
First, the whole concept is idiotic.
If I was an educator and someone came to me and asked about "risk management" "how much time should I spend on it" "what risk management should I have", I'd just slap them :D
Here is your risk management plan "don't be an idiot" now go play.
Here is what (correct...) trading is: via information gathering (patterns that repeat themselves + news + experience/instinct), you choose to go long or short on a currency/stock/crypto/etc. You have a vague idea of the minimum winrate to expect how much $$$ you are putting on the table and how much you are going to get out of this (can't really know these numbers exactly just have a vague idea I think backtesting the "worse case scenario" and this giving at least 50/50 is what we need, as far as I know there are not really any mechanical systems that work out there out of quant funds that gather terabytes of data on a daily... and even them don't really know for sure and sometimes lose... if there was ... there wouldn't be for long idk I think we'd know about it). You also consider the best and worse case scenarios.
I see no "risk management" part of trading. The whole thing is risk x to z money with a to b probability to make t to v money with c to d probability. How is there a "risk management" facet? Is there a "swimming" part I should not ignore in the front crawl? Lol wut? "Oh ye it's not all about moving your arms in the front crawl you know, there is also a swimming part".
"I am not the best trader but I am really good at risk management" <=== On par with "dot com stocks can keep going up forever because the internet allows for infinite productivity it's so abstract I am so smart (not) muuuh bags" and "Bitcoin will go to 5 million $ maths and economic laws do not apply to this new thing" on the level of stupidity.
Just like the little messages we keep seing "careful trading carries a high level of risk". Anyone that needs this message is too stupid to trade.
So anyway, what this guy said about pigs it is true. You keep risking half a percent or whatever, you will grow, but you'll wait your whole life to get from 5000$ to millionaire.
At some point, you have been trading for a while and you found a gem, or you took hundreds of trades from the same strategy and you know you are good enough to get an 80% winrate (because there is no mecanical system afaik and you are going to have to be a discretionary trader to succeed), you know you can handle some big risk (poker player for example, or just don't care about money) you want to take a big leap, you are going to have to risk big. Why do alot of people become successful but never make it really big? They took the leap forward on a few thousands, but then they stopped once they got to big amounts because not warriors but little crying chihuahuas with tiny balls and just stay at that level or start teaching to make more (the 10% that are not straight up lying scammers), and ye of course the little chihuahas that get into teaching all keep repeating how you should not risk more than 1%.
All the famous billionaires Ray Dalio, George Soros, Warren Buffet, they all risked big and took big losses. Ray Dalio even had it so bad, he fired every one from his fund until only 1 person was left in it: himself :D, he had to ask his father for money haha so he might have took it a little too far.
Oh quite interestingly, the big players that took huge losses took the biggest losses on short position. Sure they're very profitable and all, but doesn't mean you should go crazy either...
When you short, you must be prepared for spikes of 200%, it has happened in the past (does not apply to currencies they're a little different), whereas long you cannot lose more than 100%.
My belief is:
- never ever go crazy on shorts, no matter what.
- do not ever go big ever until you took hundreds of trades (or less if you position trade...) and are seasoned, really know what you are doing, not "I think because I backtested this"
- having theorical experience is not enough, unless you are a supercomputer. You must have ACTUALLY traded for a while, with real money.
- when you are totally confident, if you want to accelerate that growth a little, besides improving and doing more research of course, consider upping your risk, move it from 0.5% to 3%, then 5%. going from 0.5% risk to 5% for a while means an exponential explosive difference, 20 wins with 0.5% risk equals 10% growth, with 5% risk it equals way more than 10 times more, it equals 165% returns. etc.
- Obviously always consider the worse case scenario... Anyone that says "it never can" should be gunned down on sight (not an actual call to violence), but seriously they are too stupid to trade.
- Be like a spider. Be very very very patient, for years. But when the time to strike comes, just go for it.
- Make sure you can handle the maximum possible loss (which should be capped if you never go big on shorts). For me as long as I have enough left to live and bounce back, I don't care about big risks, anything over what I stricly need to survive is bonus money menat for playing. If you do not have this mentality, do not risk that much.
- Most people that get into this game as fresh noobs directly want to start as countertrend traders AND risk big asap too. This is how they all get destroyed and we get these terrible stats, or become legends in 5% cases, and then get destroyed later on because they actually just got lucky. Then they either quit, or start risking very small, the exact opposite of what I think every one should be doing: never quit. Start very small, and when you have enough experience and are at the absolute top of your game, with no distractions, then you up the risk give that account a big boost.
*** This is not financial advice, if you go risk everything on 1 bet and end up broke, not my problem.
Now go play!
If I was an educator and someone came to me and asked about "risk management" "how much time should I spend on it" "what risk management should I have", I'd just slap them :D
Here is your risk management plan "don't be an idiot" now go play.
Here is what (correct...) trading is: via information gathering (patterns that repeat themselves + news + experience/instinct), you choose to go long or short on a currency/stock/crypto/etc. You have a vague idea of the minimum winrate to expect how much $$$ you are putting on the table and how much you are going to get out of this (can't really know these numbers exactly just have a vague idea I think backtesting the "worse case scenario" and this giving at least 50/50 is what we need, as far as I know there are not really any mechanical systems that work out there out of quant funds that gather terabytes of data on a daily... and even them don't really know for sure and sometimes lose... if there was ... there wouldn't be for long idk I think we'd know about it). You also consider the best and worse case scenarios.
I see no "risk management" part of trading. The whole thing is risk x to z money with a to b probability to make t to v money with c to d probability. How is there a "risk management" facet? Is there a "swimming" part I should not ignore in the front crawl? Lol wut? "Oh ye it's not all about moving your arms in the front crawl you know, there is also a swimming part".
"I am not the best trader but I am really good at risk management" <=== On par with "dot com stocks can keep going up forever because the internet allows for infinite productivity it's so abstract I am so smart (not) muuuh bags" and "Bitcoin will go to 5 million $ maths and economic laws do not apply to this new thing" on the level of stupidity.
Just like the little messages we keep seing "careful trading carries a high level of risk". Anyone that needs this message is too stupid to trade.
So anyway, what this guy said about pigs it is true. You keep risking half a percent or whatever, you will grow, but you'll wait your whole life to get from 5000$ to millionaire.
At some point, you have been trading for a while and you found a gem, or you took hundreds of trades from the same strategy and you know you are good enough to get an 80% winrate (because there is no mecanical system afaik and you are going to have to be a discretionary trader to succeed), you know you can handle some big risk (poker player for example, or just don't care about money) you want to take a big leap, you are going to have to risk big. Why do alot of people become successful but never make it really big? They took the leap forward on a few thousands, but then they stopped once they got to big amounts because not warriors but little crying chihuahuas with tiny balls and just stay at that level or start teaching to make more (the 10% that are not straight up lying scammers), and ye of course the little chihuahas that get into teaching all keep repeating how you should not risk more than 1%.
All the famous billionaires Ray Dalio, George Soros, Warren Buffet, they all risked big and took big losses. Ray Dalio even had it so bad, he fired every one from his fund until only 1 person was left in it: himself :D, he had to ask his father for money haha so he might have took it a little too far.
Oh quite interestingly, the big players that took huge losses took the biggest losses on short position. Sure they're very profitable and all, but doesn't mean you should go crazy either...
When you short, you must be prepared for spikes of 200%, it has happened in the past (does not apply to currencies they're a little different), whereas long you cannot lose more than 100%.
My belief is:
- never ever go crazy on shorts, no matter what.
- do not ever go big ever until you took hundreds of trades (or less if you position trade...) and are seasoned, really know what you are doing, not "I think because I backtested this"
- having theorical experience is not enough, unless you are a supercomputer. You must have ACTUALLY traded for a while, with real money.
- when you are totally confident, if you want to accelerate that growth a little, besides improving and doing more research of course, consider upping your risk, move it from 0.5% to 3%, then 5%. going from 0.5% risk to 5% for a while means an exponential explosive difference, 20 wins with 0.5% risk equals 10% growth, with 5% risk it equals way more than 10 times more, it equals 165% returns. etc.
- Obviously always consider the worse case scenario... Anyone that says "it never can" should be gunned down on sight (not an actual call to violence), but seriously they are too stupid to trade.
- Be like a spider. Be very very very patient, for years. But when the time to strike comes, just go for it.
- Make sure you can handle the maximum possible loss (which should be capped if you never go big on shorts). For me as long as I have enough left to live and bounce back, I don't care about big risks, anything over what I stricly need to survive is bonus money menat for playing. If you do not have this mentality, do not risk that much.
- Most people that get into this game as fresh noobs directly want to start as countertrend traders AND risk big asap too. This is how they all get destroyed and we get these terrible stats, or become legends in 5% cases, and then get destroyed later on because they actually just got lucky. Then they either quit, or start risking very small, the exact opposite of what I think every one should be doing: never quit. Start very small, and when you have enough experience and are at the absolute top of your game, with no distractions, then you up the risk give that account a big boost.
*** This is not financial advice, if you go risk everything on 1 bet and end up broke, not my problem.
Now go play!
Commentaire
"The number of casualties in hospitals due to 'complications' human mistakes that get ignores 'these things happen' amount to 2 full jumbo jets falling out of the sky every day"Wot.
Once we realize that imperfect understanding is the human condition there is no shame in being wrong, only in failing to correct our mistakes.
Air companies do not trust humans they use (orange) black boxes to analyse mistakes and adjust or correct them, and now flying planes (outside of air afghanistan air congo air isis etc obv.) is safer than sitting in a bunker opening a can of beans.
Let that sink in...
Note every thing analyse your past trades in details and trading performance will go up by 1000000000000000% just like air safety did believe it or not like it or not.
Commentaire
Things such as not paying attention to fake/trash news is NOT risk management.It is alot of things:
It is not being a failure trader that will never make it instead.
It is not being a sheep.
It is common sense.
It is not being stupid.
It is part of the things you know NOT to do.
CNBC fast money published a picture of a nuclear mushroom with the words "crypto combustion" today. 'Nuff said.
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