Your trading style forms a basis for your beliefs about how to enter the market. This is important because you really only trade your beliefs about the market. It’s very hard to trade something that’s going up if you believe it is overvalued. Similarly, it’s very hard to trade something…
Monthly Archives: November 2009
Position Sizing Continued
osition sizing is that part of your system that tells you “how much†throughout the course of the trade. And, assuming you have a positive expectancy system, that variable, along with your personal psychology, controls about 90% of the variability of your performance in trading. THAT’S HOW IMPORTANT IT IS….
Position Sizing Is More Important Than You Think
Before we discuss this topic, let me give you some important background information. I tend to think of trading systems by the distribution of R-multiples that they generate. And the average R (or mean R) of the system’s R-multiple distribution is the expectancy of the system. It tells you what…
Hank Pruden on "Behavioral Finance" and Technical Analysis
Hank Pruden’s theory of “Behavioral Finance” proposes that human flaws are consistent, measurable and predictable, and being aware of and utilizing this phenomenon can benefit a trader. “For the better part of 30 years, the discipline of finance has been under the thrall of the random walk\cum efficient market hypothesis….
Every Trading System Can Be Described By the R-multiples It Generates
Last week I talked about determine your initial risk for each trade and how you could express your profit and losses as a ratio of that initial risk. I recommended that you always have a bail-out point before you enter into a trade, but if you haven’t done that then…