Top down risk control
I have recently analyzed more significant market cycle timing since my systems have warranted me.
Consequently, I wanted to expand on certain risk aspects after mentioning creep in the microenvironment.
We are now in a high-risk market cycle where various bottom scenarios could be created.
In a washout scenario, possibly fueled by surprise disaster news (terrorist attack, natural disaster, and alike), a six sigma spike can shock the financial systems worldwide and take some banks, clearing houses, and brokers out for good.
Nothing is more damaging to your trading career, both emotionally and financially than a massive drawdown in your equity curve.
As such, a top-down risk control plan is essential:
1.Visualize and rehearse any and all events that might affect your situation and have planned responses worked out; otherwise, you will be sitting frozen behind your screen.
2.No cash should be sitting at your various brokerages before you do not have a minimum of 5x20 sample size showing a robust positive expectancy of forward-tested paper traded rule defined system. (+minimum 500 backtested trades)
3.Diversify risk by having various brokers and various clearing houses. (Anything can go belly up, even the most renowned firms)
4.Have a complete backup system of computers, screens, and modems, ... in place alongside an independent electrical backup.
5.Befriend your broker (your commissions pay for his kid's college fund) and have him commit to picking up the phone in a six sigma event on the second ring-make it worth his while)
6.If you are trading size, do the same with a guy on the floor of the exchange. The floor is typically a bit longer open when Globex is already down, and this person can still place a short on the large contracts to hedge you. (alternatively, you can have butterfly option spreads run as insurance over the size of your entire accounts)
7.Make sure your stop orders do not rest on your computer. They need to sit on the broker's servers and, even better, on Globex itself.
8.Never allow compounding risk through related positions-In In six sigma events, typically, all markets go down simultaneously.
9.Murphy's law is much more present in the markets than elsewhere!
10.90% of traders trade too large. Trade smaller!
11.Have all your accounts set up that way that you can wire between them quickly?
12.Find a bank of your trust (some banks are more secure due to gold holdings and different lending practices). The book series." Conquer the Crash" by Robert Prechter typically entails data sheets of where your money is most secure. https://www.amazon.com/Conquer-Crash-2020-Deflationary-Depression/dp/1616041234/ref=sr_1_1?crid=1M08OU4RQ9YM6&keywords=conquer+the+crash+2020+robert+prechter&qid=1666653634&qu=eyJxc2MiOiIxLjgyIiwicXNhIjoiMS4wMiIsInFzcCI6IjAuNzIifQ%3D%3D&sprefix=Conquer+the+Crash%2Caps%2C133&sr=8-1&ufe=app_do%3Aamzn1.fos.18ed3cb5-28d5-4975-8bc7-93deae8f9840
13.Build a well-balanced portfolio that holds a percentage of physical precious metals