A reader late asked me a practiced query for these volatile times: "How tin I merchandise the manner I desire to merchandise as well as non merchandise P&L?"
I volition render my reply to this question, but thence I'd similar to invite readers to submit their ain answers via comments to this post.
For me, seat sizing is a psychological strategy likewise every bit a strategy for peril management. If I possess got a organization for seat sizing as well as a stop-loss level, I tin define exactly how much dollar peril I desire to set into a merchandise idea.
My seat sizing is currently one-half of what it commonly runs; I've made that a criterion practise when VIX > 30.
What that way is that I am keeping my dollar exposure to the marketplace relatively constant across diverse marketplace conditions. I produce non sense undue psychological volatility during marketplace volatility, only because I produce non permit myself to possess got to a greater extent than dollars at peril per trade. That normalizes my psychological exposure, allowing me to focus on merchandise ideas as well as the management of my positions rather than P/L swings.
I realize this goes against the grain of many traders' thinking. They encounter volatile marketplace weather as well as remember that they should last making a fortune catching the large swings. But, to purpose the one-time analogy, I'd rather last the casino than the gambler. I'd similar to possess got my slice of probability out of markets on a nice, steady, regular basis. It's much easier to non focus on P/L when no unmarried merchandise or trading twenty-four sixty minutes catamenia tin brand or interruption your month. My dollar peril per merchandise is no dissimilar at in 1 lawsuit than it was during 2007.
So how produce you lot continue yourself trading the manner you lot desire to merchandise during these volatile times? Comments appreciated!
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