Low risk, low risk, low risk
That is our mantra. It is large draw downs that kill most equity curves and can quite frankly wipe out performance and a trading account. More over it leaves emotional dents in investors that most don’t even recover from. Last weeks silver long entry, posted live in our telegram channel , provides for a good example to what extreme we manage risk. Add a good hit rate ( see our silver chart book from September 1st 2019) and a proper risk reward ratio plus money management, and you are halfway to success. Low risk, low risk, low risk.
Daily chart, silver/US Dollar 9/3/2019, “action versus reaction”:
Silver in US-Dollar, daily chart as of Sep 9th, 2019
On September 9th 2019 we aggressively entered a long position due to multiple edges. The main goal is to get quickly out of the entry zone to not expose capital to risk. This with the aim to take partial profits fairly quickly. The main edge to achieve such a low risk entry is to buy into a strongly selling market. The “action/reaction” principle is one of the main facilitators of reaching such a goal.
Silver, sixty minute chart, 9/10/2019, “Baldwin exit”:
Silver in US-Dollar, 60 minute chart as of Sep 10th, 2019
The next day prices stretch even further against us. We were in to early. Discipline requires to get out. We employ an advanced strategy, the “Baldwin exit”. This strategy makes use of a high likelihood of even further stretched prices to bounce. We scratch the trade exiting at original entry levels for a break even scenario. Emotionally one finds oneself in a situation of hope since a possible reversal is now more likely for prices going up. Strict risk rules warrant for a disciplined exit strategy instead. One was wrong with entry timing-so get out.
Daily chart, silver in US Dollar – September 11th 2019, “you can always go back in”:
Silver in US-Dollar, daily chart as of Sep 11th, 2019
On the 11th of September, with only timid price advancements and a slightly bearish candlestick wick to the upside, reentries did not look tempting. Following ones intuition, guided by hope, would again lead to wrong trading behavior. Instead we follow strict entry and risk rules to abstain from sub par entries.
Daily chart, silver in US Dollar – September 12 2019, “clear weakness”:
Silver in US-Dollar, daily chart as of Sep 12th, 2019
The following day the market shows its true hand. The choice of having scratched the trade was the correct one.
September 13 2019, daily chart, silver in US Dollar – “emotional reward”:
Silver in US-Dollar, daily chart as of Sep 13th, 2019
Finally on Friday the 13th of September we get emotionally rewarded. This for the disciplined behavior of not risking money in less than ideal circumstances. The market was printing new intermediate lows and we would have been stopped out on a large stop loss if we would have held on to this trade for to long.
It is not important if this particular trade turned out to be a winner or a looser after we exited it. What is meaningful is that only an extremely low risk approach applied over and over gain will result in statistical probabilities that lead to consistent results of extracting capital from the market more often than not. This discipline based on strict rules followed, allows to overwrite emotions triggered by the market and follows a path of principles.
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All published information represents the opinion and analysis of Mr Korbinian Koller & his partners, based on data available to him, at the time of writing. Mr. Koller’s opinions are his own and are not a recommendation or an offer to buy or sell securities. Mr. Koller is an independent analyst who receives no compensation of any kind from any groups, individuals or corporations. As trading and investing in any financial markets may involve serious risk of loss, Mr. Koller recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction and do your own due diligence and research when making any kind of a transaction with financial ramifications.
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