Some words of wisdom on risk management
from Dr. Alexander Elder "Trading for a Living" chapter 10:
"You need to use your intellect instead of trading on gut feeling."
"A real professioanl does not get too excited about wins or losses."
"You need to concentrate on trading right-and not on the money."
"Each trade has to be handled like a surgical procedure-seriously, soberly, without sloppiness or shortcuts."
"Professioals tend to run as soon as they smell trouble and re-enter the market when they see fit. Amatures hang on and hope."
"Serious traders place a stop the moment they enter a trade. As time passes, stops need to be adjusted to reduce the amount of money at risk and to protect a bigger chunck of profit."
"Losers who move stops away from the market vote in favor of fantasy and against reality."
"A stop will not protect you from a bad trading system; the best it can do is slow down the damage."
"Avoid all trades where a logical stop would expose more than 2 percent of your equity. This includes slippage and commissions."
What a great book to read over and over. I bought this book and read it the first time in September of '99, but I was a 'green horn' with a new computer in a bull market and still managed to lose money on a regular basis. A lot of times I felt like a deer staring at oncoming head lights. I take risk management much more seriously now.
AI
