Stocks & Commodities V. 28:7 (63): Q&A by Don Bright
Product Description
Q&A by Don Bright
MONITORING RISK
First off, I want to say that I have been reading your Stocks & Commodities column and blogs for years. With all the bad information and negativity out there, I applaud you for your willingness to share, your frankness, and especially keeping your cool under fire at times.
Now, I have a couple questions about risk management, both from a trader’s perspective and a trading firm’s perspective. First, as a retail trader with a $50,000 account and sometimes using Pdt margin of four times equity, I have written a program that places stop-loss orders at 1% of my equity for all my trades. But I seem to get hit too often and then see the market reverse over the next time frame. How would you handle this situation?
Second, I’m thinking about joining a prop trading firm, but I am concerned about possible losses due to using leverage. How does your firm monitor risk on all your traders? Do many of your traders blow up accounts when things happen like the May 6th 1,000-plus point move in the market? I realize that day was extreme, but any light you can shed would really be appreciated.— Optimizer
MONITORING RISK
First off, I want to say that I have been reading your Stocks & Commodities column and blogs for years. With all the bad information and negativity out there, I applaud you for your willingness to share, your frankness, and especially keeping your cool under fire at times.
Now, I have a couple questions about risk management, both from a trader’s perspective and a trading firm’s perspective. First, as a retail trader with a $50,000 account and sometimes using Pdt margin of four times equity, I have written a program that places stop-loss orders at 1% of my equity for all my trades. But I seem to get hit too often and then see the market reverse over the next time frame. How would you handle this situation?
Second, I’m thinking about joining a prop trading firm, but I am concerned about possible losses due to using leverage. How does your firm monitor risk on all your traders? Do many of your traders blow up accounts when things happen like the May 6th 1,000-plus point move in the market? I realize that day was extreme, but any light you can shed would really be appreciated.— Optimizer
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