Most people are willing to climb in their car and put on their seat belt every time. These same people always look both ways before crossing the street. In spite of this aversion to risk in their everyday life they are willing to go all in to some junk stock on a whim. Do you really think that trading is that easy? Just because you can click a button does not mean that it is that easy to make real money. If you always trade thinking you have an edge but you can’t even explain what your edge is then you are headed for disaster. In trading parlance it is called blowing up and it means that you have lost all your money and your account is done.
Well even with mediocre investment selection you can actually last a long time and maybe even last long enough to learn some better selection criteria if you take the time to learn risk management. Risk management comes in many forms but the underlying criteria is that you are trying to minimize your losses while still allowing for solid gains. Continue reading ‘Risk Management and Macro Traders’ »