![]() ![]() “A good approach could be sabotaged by a few mistakes. A method that has an edge is of no use if risk management is not taken very seriously. Schwager says proper risk management is extremely important as traders run the risk of losing a lot of money. That’s the edge," says he.Īfter developing a method that has an edge and that suits a trader’s personality, the next step should be to plan appropriate risk management. I just mean that over time it’s making more than it’s losing. "By work, I don’t mean it’s a money machine. This confidence, he says, comes when one starts making more money than what is lost. ![]() They pay off for what works, and what works may often be very counter-intuitive,” he says.Īccording to Schwager, one needs to have the confidence that the approach he has chosen to follow will work in the long run. On paper, it might sound reasonable, but markets do not pay off for approaches that sound reasonable. Schwager says it is important that whatever approach one adopts should have an extra edge that can set him apart from others.Ī trading approach may be reasonable, but if it lacks an edge, it may not be able to provide success. On the other hand, you’ve got people like Martin Schwartz who’ve done phenomenally well using technical analysis and would say: ‘I spent a decade as a fundamental analyst, but I got rich as a technician’,” says he. He’d say the only people he’s met that made money in technical analysis are those who sell their technical analysis services, that’s his take on it. ![]() “There are people like Jim Rogers who have complete disdain for technical analysis. Yet both of them did very well using the approach each was comfortable with. On the other hand, Martin Schwartz could not profit using fundamental analysis. Giving an example, he says Jim Rogers was never able to make money using technical analysis. It’s a discovery process, an evolutionary process,” he says. “A person has to know whether he is comfortable with fundamental or technical, long term or short term, certain types of markets, wider risk or less risk… You can go through a whole checklist of things and find out it’s different for each individual. ![]()
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