Risk Management II

BarroMetrics Views: Risk Management II

Turning today to Baz’s questions – see latest comment below…

Before I tackle the question, let me first look at what I consider to be the assumptions behind it (Baz please correct me if I am wrong about your assumptions).

Baz is looking for a high win rate. If I were coaching Baz, my first question would be:

“Why are you trading?”

I would expect a reply along the lines:

“To make money”.  I’d then ask:

“What is more important to you, to make money or to have a win rate? If you were given the choice between making money or having a high win rate, which would you choose”.

Baz would probably reply: “I want both”.

“But if you had to choose, which choice would you make?”

Let me ask that question of all of you – ‘which choice would you make?’. Think carefully about your reply – let it be as genuine and honest as you can make it. The answer may surprise you. And, a genuine and honest answer may well hold the key to the reason why you are not consistently profitable (assuming that at this stage you are not profitable).

Baz, how about dropping a comment and giving your answer to this question? If shy, I’ll accept your email response.

More tomorrow.

Baz’s Latest Comment

Hi Ray, What i was trying to do was, based on my observations of the forex market data, define a clear set of trading plans. Prima Facie ,it had a high win rate. To evaluate the data using Expectancy Formula to avoid Murphy s Law.
Also to use the process as an introspection so as to tighten up any sloppy habits that may creep in. A Renaissance.
cheers Baz the Inquirer

6 thoughts on “Risk Management II”

  1. Hi Ray, I have made large profit, i was able to buy my house from trading. i traded the SPI in Australia. I found it more difficult trading Forex. So i decided get purge myself of any bad habbits i picked up over the years. And copy the 8% in the brokers report. So i was aware of your question from your video, so i wrote down travel, lifestyle, buy my own plane. i also cut out pictures to visualise. My biggest fear was that i made a lot of money and was scared to lose it,so i invested in real estate. The fear caused me to try , investigate many many ideas, systems etc. but i found i couldnt believe the marketeers, so i decided only believe in myself once i have proved it to be correct for me. with the fear, i couldnt pull the trigger, so i just stopped trading. But i also figured i have a high IQ,i qualify for Mensa ,so why do i have the fear, i love trading, i enjoy the research too.My father died, ive never felt such sorrow but understood the cycle of life, so the combination of many things have caused me to analyse myself including the trading.I read and re read your book and each time something sinks in and gives me another a ha moment. so right now, its back to basics, im writing a comprehensive trade plan. thanks Ray for your help.
    cheers Baz

  2. Hi Baz

    Thanks for sharing so candidly.

    One question remains: for you, at the deepest level, what is more important when you trade, having a winning trade or making money on the trade?

  3. It has to be making money on the trade is my deepest level belief answer. I can accept a loss if i believe the system will profit overall or has edge. Part of my fear is believing in the system.
    In my personal life, i am happy to be proved wrong by logic, i hate dogma. The exit is an area i found where ego{wanting high win rate} can conflict in my trading.But i feel ok if it hits my initial stop and im wrong. It doesnt sting like it used to because i learnt to risk 2%, i use a script to auto calculate. I found that it helps me overcome my weakness by semi automating certain areas of my trading.

  4. hi Baz,
    Nowadays, besides EQ, people created many kinds of xQ.

    Just curious, is there a TQ – Trading Quotient? 🙂



  5. Paul, i dont know anything about quotients.
    I just feel that i have been more lucky than skillful in my trading and its time to re tool acquire Habits of Success, (hows that for a pun).
    Success leaves clues and i believe Ray is a man of great integrity. Where else on Earth can you get to pick the brains of a billion dollar trader?
    I believe the contents of this blog will enrich TQ
    I thank Ray for his patience and more than happy if he uses me as an example of his techniques.
    I also believe the more we participate in this blog, the more we all gain. thanks Paul for your question cheers Baz

  6. hi Baz,
    What I try to convey is that there are many kinds of ability/skill.

    Traditional IQ Test, to me, is more of finding out your mathematical solving ability/skill
    – but not measuring your mathematical cretivity, to break new ground to come out with new theorems.

    Just wondering, for all the Master Traders, how many qualify for Mansa? 🙂


    Yes, I fully agree with you that Ray is a man of great integrity.

    He is a disrectionary trader
    – he could break his rules when his gut feeling/intuition tells him to do so

    Is it true that gut feeling/intuition can only be caught, not taught?

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