Tuesday, February 02, 2010

Get comfortable!


Over the period of many years of making mistakes also known as discretionary trading I’ve heard one too many times the very same basic motif:

“Damn, that loss hurts big time”, “I did cut my loss at the predetermined stop, but it stinks”, “I don’t know if I can take any more losses like this one”… you are getting the point – are you?


It is not enough to have “stop loss rule”, not enough to be disciplined enough to honor it – what really is no less important is to be OK with the AMOUNT of loss/drawdown you are taking, you want not only “not to go broke”, but you want to sleep well knowing that you don’t have your entire stake at risk or any part of your stake betting which will make you uneasy.


Get into your comfort zone with the size of your position, limit maximum realistically possible loss on ANY single position to, let say 2% of entire portfolio value and don’t have too many positions at once and when you do – limit total risk exposure with automatic “cut off” amount of , let say, 5% on entire portfolio. (ALL positions losses combined)


Get comfortable….

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