The Perfect Risk Avoidance Trader

"You can control risk more than you can control reward; take advantage of that simple fact." -- Charles B. Goodman. John D. Rockefeller said something in a similar vein -- "Take care of the dimes and the dollars will take care of themselves." For the new trader, these two quotes mean this: "Spend your time minimizing risk, and let the market tell you how much profit it wants to give you." Said yet another way, "Cut your losses and let your profits run."

Tip: At the end of the day, if you are like most traders, you will find the small profits are consumed by the small losses, for the most part.
What is left -- your profit -- are the ones you let run.

You want to be a risk-avoidance trader. Always consider the risk involved before executing a trade. Make sure as many of your trading method ducks are in line before hitting the buy or sell button on your trading platform.

Tip: It is better to miss a winning trade than to make a losing trade. There will always be another opportunity, but once you lose -- the money is forever gone. Good traders sit on their hands much of the time -- waiting for just the right opportunity, and patiently waiting to get the most out of it.

Mr. Goodman was constantly talking about his "Belgian dentist." In Europe, Belgians are considered to be very conservative investors. In the United States, that accolade often has gone to dentists. The perfect risk-avoidance trader is then a Belgian dentist!

Tip: The risk-avoidance rubber hits the FOREX road like this: Move your S/L to the breakeven price as soon as possible. Profits begin at breakeven; endeavor to get to the latter before thinking about the former.

The Goodman approach to money management begins with entering a trade once the setup has been qualified. This is called the dagger entry technique.
By Michael Duane Archer
Michael Duane Archer has been an active futures and FOREX trader for more than 35 years. He has worked in various advisory capacities, notably as a commodity trading advisor, registered SEC investment advisor, and branch manager for Heinold of Hawaii. He currently trades FOREX and futures and is involved in several technical analysis research projects.

Copyrighted 2020. Content published with author's permission.

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