Risk Management

Four Types of Market Participant (or, How to Spot a Bad Moon Rising)

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February 13, 2014
Slider Risk Management

"If you really get this concept, you are on your way to understanding how the great Stan D. made 30%+ compounded over 30 years..."
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On the Virtues of Shifting Gears

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June 14, 2013
Slider Risk Management

It has long been recognized the small trader has an edge in being able act quickly.And it is not just speed that'creates that edge... it's flexibility too.
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Lessons in Hubris from the Herbalife Spectacle

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January 25, 2013
Lessons in Hubris from the Herbalife Spectacle

Smart traders and investors take a keen interest in blow-ups for a simple reason: They don’t want to blow up themselves...
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The Calculated Risk Mentality

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August 16, 2011
The Calculated Risk Mentality

Ed Viesturs would probably make a great trader. Except Viesturs’ passion is not markets, but mountain climbing. Viesturs is known for climbing 14 of the world’s highest mountain peaks — all of them above 26,000 feet. It took Viesturs 18 years to do it. In an interview with Steven Colbert, here is the reason...
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O Risk Manager, Where Art Thou?

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June 14, 2011
O Risk Manager, Where Art Thou?

Damn! We’re in a tight spot! - O Brother Where Art Thou Investing without risk control is like playing high stakes poker without the ability to lay down Aces or Kings. You’ll do ok for a while, maybe even a good while, as rockets and cowboys are always great starting hands. But sooner or...
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Cockroaches, Extinction Events and Anti-Fragility

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April 27, 2011
Cockroaches, Extinction Events and Anti-Fragility

Great insights stand the test of time. The value of 100-year-old trading books attests to this. An excellent insight of more recent vintage comes from a 1999 article by Rick Bookstaber, “Risk Management in Complex Organizations.” The Bookstaber excerpt I am thinking of, with clear application to trading, praises the virtues of the humble...
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The Siren Song of High Winning Percentage

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March 30, 2011
The Siren Song of High Winning Percentage

I compile statistics on my traders. My best trader makes money only 63 percent of the time. Most traders make money only in the 50 to 55 percent range. That means you’re going to be wrong a lot. If that’s the case, you better be sure your losses are as small as they can...
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Global Macro Notes: A Hard Look at Risk

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February 24, 2011
Global Macro Notes: A Hard Look at Risk

Mechanical systems trader Larry Hite has a great quote in Market Wizards: “Risk is a no-fooling around game; it does not allow for mistakes. If you do not manage the risk, eventually they will carry you out.” In one of the greatest rock and roll songs of all time, Led Zeppelin puts it another...
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“What Everybody Knows is Frequently Wrong”

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February 17, 2011
“What Everybody Knows is Frequently Wrong”

Word on the street is that this market is unshortable — that making a bearish play is like stepping in front of a train. It’s not true actually. The broad market is not a compelling short proposition, certainly. But you can find good ones if you know where to look. Natural gas, for example,...
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LTCM and the Lessons of Failure

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October 5, 2010
LTCM and the Lessons of Failure

Welcome back, your dreams were your ticket out… Welcome back, to that same old place you laughed about… - Welcome Back Kotter John Meriwether — the trader of Liar’s Poker fame and founder of Long Term Capital Management (LTCM) — is back in the game, this time with a focus on macro. As FINalternatives...
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Clarium Capital and The Perils of Inflexibility

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September 22, 2010
Clarium Capital and The Perils of Inflexibility

Change breaks the brittle. - Jan Houtema Blessed are the flexible, for they shall not be bent out of shape. - Unknown These two articles, on Peter Thiel of Clarium Capital, make for an interesting contrast. Note they are two years apart: Aug 2008: Soros Successors Thiel, Howard Prove Global Bears Rule Markets (Bloomberg)....
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“Staying Close to Shore”

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August 11, 2010
“Staying Close to Shore”

I read two to three dozen books a year on average. Probably at least half are directly related to trading.  Some of my favorite reads of the past twelve months are as follows: Invisible Hands by Steven Drobny More Money Than God by Sebastian Mallaby The Quants by Scott Patterson The Greatest Trade Ever...
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Why Traders Fail

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July 20, 2010
Why Traders Fail

Many are stubborn in pursuit of the path they have chosen, few in pursuit of the goal. - Friedrich Nietzsche From his book “In search of the human mind,” Robert Sternberg has an excellent numbered list titled “Why intelligent people fail.” The striking thing is, the list could be titled “Why Traders Fail” and...
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Ignore the Predictors: Being “Right” vs. Making Money

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July 19, 2010
Ignore the Predictors: Being “Right” vs. Making Money

When I became a winner, I said, “I figured it out, but if I’m wrong, I’m getting the hell out, because I want to save my money and go on to the next trade.” - Marty Schwartz When I see or hear of someone pushing a gigantic market call, talking as if they know...
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