Reply to thread

If I set an allocation of a 5% ( of purchase price) As an initial stop where is and how would you quantify uncontrolled risk?

Not withstanding the above you still have uncertainty in any one event you are exposed to unlimited risk,with an average of 25% loss a string of even 2 losses at the high end of the "Averaging" could render your initial capital in effective if you were to liquidate the loss and highly unlikely to recover as my example above shows if you hold it.

Purchasing 10 stock with this sort of uncertainty could be catastrophic.

Take your example that your trading now. Using $50K as a trade size each trade.

To sell all stocks now that are over 10% in loss would mean massive destruction to your capital base.So your really stuck with them and hope they make up the low end of "Averages",unless ofcourse you sell those in profit as well to offset losses. So your holdng both winners and losers.

In contrast T/T has 10 stocks and everyone of them is a winner.

Simply I cut losers and hold winners.

Diversification  is wise but still desnt negate risk mitigation in any one investment.To argue that sound diversification balances poor risk management in anyone asset is avoiding the problem not solving it.

True so I simply eliminate the effect of market risk on my business  and deal purely with my business risk.I dont have to quantify market risk,my trading model doesnt care less about actual or percieved market risk.

The herd can do whatever it likes.If it follows my trades positively then I'll stick around---negatively then I'll go away. There are no assumptions,I'm either profiting and maximising return by staying with it or its losing in which case I wont stick around very long.