- For clarity - some definitions are in order.
- Total risk limits = 100% of equity.
- Risk limits used = Maintenance margin incurred on open positions.
- "Jugular" or "Elephant" trade = risk limits used on single trade >50%
- For current short GBP/USD position, risk limits used = 0.69*0.74 = 51%
- By definition, at any one time, there can only be 1 jugular trade open.
- Most of the time, my "big" trades use no more than 25-30% of overall risk limits.
- 2 "near" jugulars are not possible because risk limits used = almost 100%. A tiny adverse variation (P&L in negative direction) would push overall risk limits to >100% thus triggering a margin call and corrective action.
- To date, all my previous attempts at catching an elephant have not been successful. Think the problem lies in timing. I have been taught to let a good trade prove itself with nice positive P&L before committing more. By the time I am sure of the trade and build it up in size, it's usually when the smart money gets out. Need to get out of the Catch 22 loop (without P, how to recognise it's a good trade? by the time P accumulates, it's no longer worthy of the elephant treatment).
No comments:
Post a Comment