Thread: Risk management protocols

Hi chaps,

Thought I'd post something here on the shiny new boards; basically I'm looking at tweaking my personal risk management at the moment, and was wondering if any of you had any hard-and-fast rules in your trading - things like 'if you're $50 from your target don't blow $500 trying to get there'... I'm looking at developing a set of protocols since I sometimes fall victim to stubborness, and would like to take some of the decision-making process out of my hands when it comes to risk.

I'd like to hear anyone else's input before I post up what I've written; any thoughts welcome.

Cheers, SL

I think the most important thing is to have no hard-and-fast rules; if certain items of news came out no matter how much down or up or whatever we are on the day we pretty much have to sodding trade it.

Something I've been trying recently is building my size during the day so I'm essentially playing with the day's profits. Unfortunately in this dead market this means trading the opens, which is where the interesting stuff happens, in too small size, so I'm going to abandon that in favour of playing the opens with yesterday's profits, if you get me

Yeah that's definitely true, obviously if a bomb goes off we're hitting it with all we've got. I don't really trade figures/news directly anyway, since a) I'm usually too slow to get a decent fill and b) I don't really see figure-bashing as being a trader; I'd much rather be able to make money around the figures and profit from the occasional 'sure thing', i.e QE extensions, presidential assassinations. I'm certainly not a stop-entry suicide junkie like several people I could mention!

I guess I'm trying to be as discretionary as possible with my trades, whilst maintaining some sort of rigidity with regards to the amount of exposure I'm taking on in those trades; I'm never, ever going to be the trader who has a 10-tick target and a 4-tick stop for every trade he enters, but trading on your gut has its drawbacks too - you're short while some asshole takes 500-lot chunks out of every offer mercilessly, you don't know why they're doing it or where they're going to stop so you end up eating a huge loss while the robot on the other side of the desk has taken his usual loser.

Also I have a nasty habit of turning $1xxx up days into $1xxx down days, which should never really happen. I definitely think there's merit to always trying to book a win, even if it's a tiny one, and certainly merit to not eating a chunky loss after being close to your target for the day.

SL

I should add that I'm not saying that people who trade figures aren't real traders, there is a skill to it and if you can make money off it who cares what I think - I'm just saying that I'm not fond of traders who sit there all day scratching one lots, waiting for NFP to come in out of line so they can bash it with a 20 lot..

Worth noting there used to be a lot more money in figures (and central bankers speaking, etc etc)...

When that comes back I'll probably go back to mainly doing it, it's much nobler in my view... less of this random noise stuff

Agreed, and don't get me wrong, if it goes back to how the more seasoned guys at my place say it was, I'll be the first to set up stop entries above and below market!

who cares about whether trading figures is respectable or not. do you consistently make money??? that is the only question that matters in trading, surely you of all guys know that?

'I should add that I'm not saying that people who trade figures aren't real traders, there is a skill to it and if you can make money off it who cares what I think'

Best to read the whole thread before you put the boot in old son.

fair point, and i'm not trying to cut anyone down. i have read your earlier posts, but what is wrong with trading small before a figure comes out, then aggressively entering upon its release? Is it not prudent to do so. My point is that if you can consistently make money doing it, then what's to dislike?

If you can consistently make money, it doesn't matter what your methods are, you're right. But the idea of trading small and then 'aggressively entering' on the release of a figure is completely ignorant of the price action up to that point. If you can consistently make money from figure-bashing, go for it, but there aren't many that can, and those that can are also proficient at reading what has happened to that point - a bullish figure in a bull market will go a lot further than a bullish figure in a bear market.

You need to understand what the market's motives are for the day, rather than just blindly buying your full clip of Stoxx just because NFP comes out better than expected. People in my office are regularly shafted on figures that come out and are shrugged off by the market, and come 1.30 the markets are at their most volatile - why use small size during times that are predictable and controllable, then break out your full clip when you don't know you're wrong until it's over?