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Friday, May 15, 2009

Silver Loss and Risk Control (VIDEO)

"A man's errors are his portals of discovery." - James Joyce

What do you do ... when your methodology is telling you to take a trade, but everything outside of your methodology is saying: "This may not be a good idea"?

Traders are often told by the current 'market wisdom', to never change their methodology or your money management. "Pick a plan, and stick with it.", they are told.

Then in the next breath they're told: "Well, you have to allow for some flexibility"

I agree with both of those statements. The obvious question becomes, how do you harmonize those two conflicting points of view?

You harmonize them, through risk control. It all has to be about risk control. I illustrate what I mean, in the following video with a trade and a loss I had yesterday in mini-Silver ...

(Video Included. If you're seeing this entry elsewhere and cannot see the Video? Click here to view the entry ...)


Risk control.

Basically, my methodology was telling me to take the trade. Everything lined up for my methodology for this trade. But there were some worrisome signs outside of my methodology. It didn't mean I couldn't take the trade.

I simply adjusted my position in order to better control and manage my risk.

As I often tell traders: "Quit looking at the market so much, and start basing decisions on protecting your account equity".

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Note: This is not an investment or trading recommendation. The losses in trading can be very real, and depending on the investment vehicle, can exceed your initial investment. I am not a licensed trading or investment adviser, or financial planner. But I do have 13 years of experience in trading and investing in these markets. The Challenge accounts are run for the education of other traders who should make their own decisions based off their own research, and tolerance for risk.

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