Chapter 14. Using and Controlling Risk to Your Advantage
“How much are you willing to lose on this trade?”
Risk is a buzzword within the financial world that can lead to a multitude of conversations. Commonly, your risk tolerance is how much stock exposure you should have at all times. This is an interpretation laughed at by every successful trader I know. The idea that you should always have stock exposure and the level should equate with your age or time horizon assumes that you have no ability to know when to move in or out of the market. I would take this a step further to say that adopting this definition of risk assumes that market timing isn’t even possible. If that is the case, I guess it is just a matter of time before the hundreds ...
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