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How do professional traders think?

Discussion in 'Trading' started by Tropo, 26th Oct, 2016.

  1. Tropo

    Tropo Well-Known Member

    17th Aug, 2005
  2. Aaron Sice

    Aaron Sice Member

    6th Feb, 2017
    Perth, WA
    I think it's a bit simpler than that.

    I try to view my trades in percent instead of dollars.

    I also don't trade more or less than 20% of any available capital on any one trade.

    That way, I'm not exposed to too much risk but is substantial enough to avoid trading for trading system sake at a nil-profit exercise after comms, spreads, interest, etc.

    I mean, if you could make 10% on a trade, why only put $1000 on it if you have a portfolio balance of $100k? It's a waste of effort and resource.

    If you will put $1 on it, then you should put 20% on it.

    Wins are in percent. Losses are in percent. Capital allocated is percent.

    Divorce your mindset from dollars and all its associations.
  3. Simon Hampel

    Simon Hampel Co-founder Staff Member

    9th Jun, 2005
    Sydney, Australia
    I recall sitting around at an investor meetup with a bunch of (amateur) traders comparing the size of their ... "returns" (expressed in percentages of course). When pressed about their massive percentage gains they admitted they only had a few thousand dollars exposed to that trade and their total trading capital was in the order of $20K or so.

    That's fine - you have to start somewhere, but don't boast about huge percentage returns until you can do it over and over again and have at least a six figure exposure to the markets - then I'll be very interested in learning how you manage your risk.

    If you can afford to absorb your loss using your salary income - you're not seriously investing and your risk profile is completely different to having enough exposure to cause some serious issues if you don't actually have a risk management strategy in place.
    austing and twisted strategies like this.