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Paul Tudor Jones – Most Important Part of Any Trade is the Risk

Too many investors worry about looking for that magical entry or magical indicator. Paul Tudor Jones stated that most important part of any trade is the risk. Without proper risk management a trader fails. Traders ( trend followers) need to focus on the money that they have at risk and how much capital is at risk on every single trade…every single sector and most importantly how much is at risk as a percentage of their total portfolio.

Trend followers control risk by proper position sizing. Proper position sizing means that you never risk more of your 1% of trading account on any single trade. There have been countless traders wiped out by one bad trade. They risk too much on a trade and it goes against them. One must take into account most trades do not work. If most trades do not work, why risk a large percentage of an account on one trade?

The only part of a trade that you can control over is the risk of that trade. The reward side of any trade is a complete mystery. The only certainty is uncertainty. No one knows the future.

This is all well and good. I speak to many traders. They know what they should be doing. They are very knowledgeable about trend following yet they have not reached their trading goals. The reasons for this start at having a winning trading attitude and truly believing in and trusting their trading plan. Most traders have not accepted the uncertainty of any trade. They assume it has to work. Most traders have not accepted truly that putting on any trade will cost them money. They expect the trade to work. Due to this, most traders live in the fear and greed mode. The greed mode is when a trade starts working. They add on or do not exit when they have a signal.

Trend following is complex. It is not for everyone. Without trading with a plan…and really believing in it…one should not trade.

Past performance is not necessarily indicative of future performance. The risk of loss in trading futures contracts, commodity options or forex can be substantial, and therefore investors should understand the risks involved in taking leveraged positions and must assume responsibility for the risks associated with such investments and for their results. You should carefully consider whether such trading is suitable for you in light of your circumstances and financial resources.
This website contains references to hypothetical trading results This website contains references to hypothetical trading results.
HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM. ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR TO ADHERE TO A PARTICULAR TRADING PROGRAM IN SPITE OF TRADING LOSSES ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY AFFECT ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL PERFORMANCE RESULTS AND ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL TRADING RESULTS
** THE MATERIAL DISPLAYED ON THIS WEBSITE IS INTENDED FOR EDUCATIONAL PURPOSES ONLY.

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