BarroMetrics Views: Manage Your Risk and Trade
If the last series of blogs I posted prove anything, they prove this: managing your risk and trade is essential to trading success.
Sure when we are in a flow stage – when we seem to be at one with the market – then maximum position sizing and maximum risk enables us to turn a small amount capital into large lumps of cash. The problem is we never know when ‘flow’ will turn to ‘normal’ and ‘normal’ to ‘ebb’.
So, the trader who is determined to be successful over time, manages his position sizing so as to take advantage of the flow without blowing up when flow ends.
The other hallmark of successful traders is the way he views individual trades: just one result in a series. Whether the trade is profitable or not, it’s only one trade. I see too many traders after a loss jump straight back into the market, desperate to recover. As Denise Shull says – it’s not the first loss that kills – it’s the second and the third……