Subjectivity in risk management --

I would like to briefly talk about risk mgmt in this thread (something that is not talked about much anywhere else)

The whole question of risk management is far from an objective subject.

1/11

One need at least one subjective piece of the puzzle to put it together, and that is an individual’s acceptance to risk.

Now that is subjective, meaning there is no rule that says how risk averse you should be. That is an integral part of your emotional makeup 😊

2/11

The problem is, human nature does not operate to maximize gain, but rather to maximize the chance of gain, i.e., maximize the # of winning trades & minimize the # of losing trades.

The result is, not only is risk controlled, but profitability is also controlled 😆

3/11

In other words, playing it safe can be just as bad as taking too much risk, because you are not optimizing your winning trades nor the days with extended ranges.

Sure, it's possible to develop trading idea based on tick charts(scalping) that will on average be profitable

4/11

However, the average profits on individual trades from such methodologies are microscopic, and the trades they generate are so many that it not reasonable to scale up these strategies.

Dont even get me started on costs and slippages here 😊

5/11