What Makes a Good Risk Manager?

Trading is not really about prediction or being right or wrong. It is really about how much are you willing to risk to find out. It’s easy to take the approach of, ‘is this trade going to work or not’, and in reality, we can’t help but think that way on a certain level. But because we will never know before hand, and because protecting capital is rule number one, we must attend to risk management and have flexible expectations instead of thinking in terms of ‘prediction’.

A set-up with a 50% win rate does not mean that the next 6 out of 10 trades will be winners . An objective market statistic based upon the past can not become a market probability about the future unless the same exact market participants are present and continue to act in the same way. Each trade, and each moment in the market, is unique for this reason.
The main point here is that although entry location is important, its how much we are willing to risk that determines our account equity and consistency over time.

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