Trade the market, not the money
• Always trade value, never trade price
• The answer to the question, “What’s the trend?” is the question, “What’s your timeframe?”
• Never allow a statistically significant unrealized gain to turn into a statistically significant realized loss (ATR)
• Don’t tug at green shoots
• When there’s nothing to do, do nothing
• Stop adjustments can only be used to reduce risk, not increase it.
• There are only two kinds of losses: big losses and small losses, given these choices – always choose small losses.
• Risk no more than 1% of AUM on any single position
• Never risk less than 1% of asset under management on any single position (as long as your models are performing well)
• Don’t Anticipate, Just Participate
• Buy the strongest, sell the weakest (RSI)
• Sideways markets eventually resolve themselves into trending markets and vice versa
• Stagger entries & exits – Regret Minimization techniques
• Look for low risk, high reward, high probability setups
• Correlations are for defense, not offense
• Drawdowns are for underleveraged trading and research
• Develop systems based on the kinds of “pain” (weaknesses) endured when they aren’t working or you’ll abandon them during drawdowns.
• Be disciplined in risk management & flexible in perceiving market behavior
• It’s not about the best RAROR, it’s about the best RAROR for your trading personality
Archives of “Project management” tag
rss“The goal of a successful trader is to make the best trades. Money is secondary.”
==== Money is secondary? What the hell? Is Alexander joking?
Well, if we take some time and analyse this quote, Mr Elder has a very important point to make. How can good trades be better than money ? Why are we indoctrinated to think that money is the primary goal?
Don’t worry I was subject to this way of thinking for a long time but realized it has huge fundamental issues. The problem is that anyone can have a great trade, a lucky trade, a momentum trade, but the question is, can you replicate this performance in the future in the long term?
I repeat, can you replicate this trade in 10 years time?
Lets think soccer, is it more important to score a goal every match or to have a system of playing the game to have high probability of scoring opportunities?
Do you prefer to have one perfect trade or many high probability trades?
If you are in this for the long term, focusing on making the highest probability trades possible is a more sustainable way for a future success. If you spend time in analyzing your entries, exits, risk management on a consistent level, you have a higher probability of achieving your goal.