{"id":11224,"date":"2011-04-30T22:55:19","date_gmt":"2011-05-01T02:55:19","guid":{"rendered":"http:\/\/www.smbtraining.com\/blog\/?p=11224"},"modified":"2011-05-01T18:14:40","modified_gmt":"2011-05-01T22:14:40","slug":"traders-ask-how-to-manage-the-risk","status":"publish","type":"post","link":"https:\/\/www.smbtraining.com\/blog\/traders-ask-how-to-manage-the-risk","title":{"rendered":"Traders Ask:  How to Manage the Risk"},"content":{"rendered":"<p><span style=\"font-family: Verdana; font-size: 10pt;\">I received an email from one of my remote trader trainees that I thought might raise some interesting points for discussion, so I asked him if I could answer him in this blog format.\u00a0 Here are his questions, and I&#8217;ll wrap up a bit at the end&#8230;<br \/>\n<\/span><\/p>\n<p><span style=\"color: #943634; font-family: Verdana; font-size: 10pt;\"><strong>Hi Adam,<br \/>\n<\/strong><\/span><\/p>\n<p><span style=\"color: #943634; font-family: Verdana; font-size: 10pt;\"><strong>I encountered this situation today and would like to ask for your thoughts \u2026 CPX was in the SMB Radar and I was thinking that this was the setup:<br \/>\n<\/strong><\/span><\/p>\n<ul>\n<li><span style=\"color: #943634; font-family: Verdana; font-size: 10pt;\"><strong>CPX is on a multi-day uptrend since the 14<sup>th<\/sup>.<br \/>\n<\/strong><\/span><\/li>\n<li><span style=\"color: #943634; font-family: Verdana; font-size: 10pt;\"><strong>It broke out of the resistance.<br \/>\n<\/strong><\/span><\/li>\n<li>\n<div><span style=\"color: #943634; font-family: Verdana; font-size: 10pt;\"><strong>And it&#8217;s now pulling back.<br \/>\n<\/strong><\/span><\/div>\n<\/li>\n<\/ul>\n<p><span style=\"color: #943634; font-family: Verdana; font-size: 10pt;\"><strong>I was thinking, &#8220;Great, this is a good breakout play.&#8221;\u00a0 As I was waiting for the confirmation, I saw this \u2026<br \/>\n<\/strong><\/span><\/p>\n<p><img decoding=\"async\" src=\"http:\/\/www.smbtraining.com\/blog\/wp-content\/uploads\/2011\/04\/050111_0256_TradersAskH1.jpg\" alt=\"\" \/><span style=\"color: #943634; font-family: Verdana; font-size: 10pt;\"><strong><br \/>\n<\/strong><\/span><\/p>\n<p><span style=\"font-family: Verdana; font-size: 10pt;\"><span style=\"color: #943634;\"><strong>So if the current candle breaks 33.10 and I get in, my stop would be a little below 32.90 which is roughly 0.25.\u00a0 I was hesitant to enter this trade because risking 0.25 seems big for me.\u00a0 Another reason why I was hesitant is because my P&amp;L at that time is +16.\u00a0 I was thinking if the trade didn&#8217;t work out, I&#8217;d end the day being negative.\u00a0 So I was confused and hesitant to enter the trade.\u00a0 I opted to stay away but this left me wondering what&#8217;s the right thinking for this case.<\/strong><\/span><br \/>\n<\/span><\/p>\n<p><span style=\"font-family: Verdana; font-size: 10pt;\">Just to put things in perspective, this guy is a newer trader who has been trading live for less than 30 trading days.  At this point, we encourage traders to keep their risk small and to focus on less volatile stocks, so this stock would have been a bit out of character for the other stocks this guy usually trades.  In addition, his average losing trade is less than 0.09, so the risk on this trade, while not large, is also a bit more than he is used to.\u00a0 Let&#8217;s open this for discussion in the comments here, and I&#8217;ll do another blog post in a few days where I&#8217;ll try to summarize the discussion and share my thoughts.\u00a0 There is more than one right answer to the questions he is asking here, but I see the main issues as follows:<\/span><\/p>\n<ul>\n<li><span style=\"font-family: Verdana; font-size: 10pt;\">How is the quality of the setup?\u00a0 (Ignore what happened after, evaluate on its own.)\u00a0 Is this a reproducible pattern you can trade again and again?<\/span><\/li>\n<li><span style=\"font-family: Verdana; font-size: 10pt;\">Is his assessment of the risk in the trade correct?<\/span><\/li>\n<li><span style=\"font-family: Verdana; font-size: 10pt;\">Was he correct in skipping the trade?<br \/>\n<\/span><\/li>\n<\/ul>\n<p><a href=\"http:\/\/www.twitter.com\/AdamG_SMB\"><img decoding=\"async\" src=\"http:\/\/twitter-badges.s3.amazonaws.com\/follow_me-c.png\" alt=\"Follow AdamG_SMB on Twitter\" \/><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>AdamG_SMB shares a question from a developing trader&#8230;<\/p>\n","protected":false},"author":388,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[943,1,3,1373],"tags":[910,1412,188],"class_list":["post-11224","post","type-post","status-publish","format-standard","hentry","category-adam-grimess-blogs","category-general-comments-2","category-technical_plays","category-trading-lesson","tag-breakout","tag-pullback","tag-risk","no-post-thumbnail"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v26.1.1 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Traders Ask: How to Manage the Risk | SMB Training<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.smbtraining.com\/blog\/traders-ask-how-to-manage-the-risk\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Traders Ask: How to Manage the Risk | SMB Training\" \/>\n<meta property=\"og:description\" content=\"AdamG_SMB shares a question from a developing trader...\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.smbtraining.com\/blog\/traders-ask-how-to-manage-the-risk\" \/>\n<meta property=\"og:site_name\" content=\"SMB Training Blog\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/smbcap\/\" \/>\n<meta property=\"article:published_time\" content=\"2011-05-01T02:55:19+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2011-05-01T22:14:40+00:00\" \/>\n<meta property=\"og:image\" content=\"http:\/\/www.smbtraining.com\/blog\/wp-content\/uploads\/2011\/04\/050111_0256_TradersAskH1.jpg\" \/>\n<meta name=\"author\" content=\"Adam\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@smbcapital\" \/>\n<meta name=\"twitter:site\" content=\"@smbcapital\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Adam\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"2 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/www.smbtraining.com\/blog\/traders-ask-how-to-manage-the-risk#article\",\"isPartOf\":{\"@id\":\"https:\/\/www.smbtraining.com\/blog\/traders-ask-how-to-manage-the-risk\"},\"author\":{\"name\":\"Adam\",\"@id\":\"https:\/\/www.smbtraining.com\/blog\/#\/schema\/person\/dc89886f611b7f43996f76d73a99c964\"},\"headline\":\"Traders Ask: How to Manage the Risk\",\"datePublished\":\"2011-05-01T02:55:19+00:00\",\"dateModified\":\"2011-05-01T22:14:40+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\/\/www.smbtraining.com\/blog\/traders-ask-how-to-manage-the-risk\"},\"wordCount\":405,\"commentCount\":9,\"publisher\":{\"@id\":\"https:\/\/www.smbtraining.com\/blog\/#organization\"},\"image\":{\"@id\":\"https:\/\/www.smbtraining.com\/blog\/traders-ask-how-to-manage-the-risk#primaryimage\"},\"thumbnailUrl\":\"http:\/\/www.smbtraining.com\/blog\/wp-content\/uploads\/2011\/04\/050111_0256_TradersAskH1.jpg\",\"keywords\":[\"breakout\",\"pullback\",\"risk\"],\"articleSection\":[\"Adam Grimes's blogs\",\"General Comments\",\"Technical Plays\",\"Trading Lesson\"],\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"CommentAction\",\"name\":\"Comment\",\"target\":[\"https:\/\/www.smbtraining.com\/blog\/traders-ask-how-to-manage-the-risk#respond\"]}]},{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.smbtraining.com\/blog\/traders-ask-how-to-manage-the-risk\",\"url\":\"https:\/\/www.smbtraining.com\/blog\/traders-ask-how-to-manage-the-risk\",\"name\":\"Traders Ask: How to Manage the Risk | SMB Training\",\"isPartOf\":{\"@id\":\"https:\/\/www.smbtraining.com\/blog\/#website\"},\"primaryImageOfPage\":{\"@id\":\"https:\/\/www.smbtraining.com\/blog\/traders-ask-how-to-manage-the-risk#primaryimage\"},\"image\":{\"@id\":\"https:\/\/www.smbtraining.com\/blog\/traders-ask-how-to-manage-the-risk#primaryimage\"},\"thumbnailUrl\":\"http:\/\/www.smbtraining.com\/blog\/wp-content\/uploads\/2011\/04\/050111_0256_TradersAskH1.jpg\",\"datePublished\":\"2011-05-01T02:55:19+00:00\",\"dateModified\":\"2011-05-01T22:14:40+00:00\",\"breadcrumb\":{\"@id\":\"https:\/\/www.smbtraining.com\/blog\/traders-ask-how-to-manage-the-risk#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/www.smbtraining.com\/blog\/traders-ask-how-to-manage-the-risk\"]}]},{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/www.smbtraining.com\/blog\/traders-ask-how-to-manage-the-risk#primaryimage\",\"url\":\"https:\/\/www.smbtraining.com\/blog\/wp-content\/uploads\/2011\/04\/050111_0256_TradersAskH1.jpg\",\"contentUrl\":\"https:\/\/www.smbtraining.com\/blog\/wp-content\/uploads\/2011\/04\/050111_0256_TradersAskH1.jpg\",\"width\":\"629\",\"height\":\"442\"},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\/\/www.smbtraining.com\/blog\/traders-ask-how-to-manage-the-risk#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\/\/www.smbtraining.com\/blog\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"Traders Ask: How to Manage the Risk\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\/\/www.smbtraining.com\/blog\/#website\",\"url\":\"https:\/\/www.smbtraining.com\/blog\/\",\"name\":\"SMB Training Blog\",\"description\":\"Lessons from the trading desk\",\"publisher\":{\"@id\":\"https:\/\/www.smbtraining.com\/blog\/#organization\"},\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\/\/www.smbtraining.com\/blog\/?s={search_term_string}\"},\"query-input\":{\"@type\":\"PropertyValueSpecification\",\"valueRequired\":true,\"valueName\":\"search_term_string\"}}],\"inLanguage\":\"en-US\"},{\"@type\":\"Organization\",\"@id\":\"https:\/\/www.smbtraining.com\/blog\/#organization\",\"name\":\"SMB Training\",\"url\":\"https:\/\/www.smbtraining.com\/blog\/\",\"logo\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/www.smbtraining.com\/blog\/#\/schema\/logo\/image\/\",\"url\":\"https:\/\/www.smbtraining.com\/blog\/wp-content\/uploads\/2022\/07\/Logo-e1658419502954.png\",\"contentUrl\":\"https:\/\/www.smbtraining.com\/blog\/wp-content\/uploads\/2022\/07\/Logo-e1658419502954.png\",\"width\":230,\"height\":81,\"caption\":\"SMB Training\"},\"image\":{\"@id\":\"https:\/\/www.smbtraining.com\/blog\/#\/schema\/logo\/image\/\"},\"sameAs\":[\"https:\/\/www.facebook.com\/smbcap\/\",\"https:\/\/x.com\/smbcapital\",\"https:\/\/www.youtube.com\/user\/smbcapital\"]},{\"@type\":\"Person\",\"@id\":\"https:\/\/www.smbtraining.com\/blog\/#\/schema\/person\/dc89886f611b7f43996f76d73a99c964\",\"name\":\"Adam\",\"url\":\"https:\/\/www.smbtraining.com\/blog\/author\/aceman\"}]}<\/script>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"Traders Ask: How to Manage the Risk | SMB Training","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/www.smbtraining.com\/blog\/traders-ask-how-to-manage-the-risk","og_locale":"en_US","og_type":"article","og_title":"Traders Ask: How to Manage the Risk | SMB Training","og_description":"AdamG_SMB shares a question from a developing trader...","og_url":"https:\/\/www.smbtraining.com\/blog\/traders-ask-how-to-manage-the-risk","og_site_name":"SMB Training Blog","article_publisher":"https:\/\/www.facebook.com\/smbcap\/","article_published_time":"2011-05-01T02:55:19+00:00","article_modified_time":"2011-05-01T22:14:40+00:00","og_image":[{"url":"http:\/\/www.smbtraining.com\/blog\/wp-content\/uploads\/2011\/04\/050111_0256_TradersAskH1.jpg","type":"","width":"","height":""}],"author":"Adam","twitter_card":"summary_large_image","twitter_creator":"@smbcapital","twitter_site":"@smbcapital","twitter_misc":{"Written by":"Adam","Est. reading time":"2 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"Article","@id":"https:\/\/www.smbtraining.com\/blog\/traders-ask-how-to-manage-the-risk#article","isPartOf":{"@id":"https:\/\/www.smbtraining.com\/blog\/traders-ask-how-to-manage-the-risk"},"author":{"name":"Adam","@id":"https:\/\/www.smbtraining.com\/blog\/#\/schema\/person\/dc89886f611b7f43996f76d73a99c964"},"headline":"Traders Ask: How to Manage the Risk","datePublished":"2011-05-01T02:55:19+00:00","dateModified":"2011-05-01T22:14:40+00:00","mainEntityOfPage":{"@id":"https:\/\/www.smbtraining.com\/blog\/traders-ask-how-to-manage-the-risk"},"wordCount":405,"commentCount":9,"publisher":{"@id":"https:\/\/www.smbtraining.com\/blog\/#organization"},"image":{"@id":"https:\/\/www.smbtraining.com\/blog\/traders-ask-how-to-manage-the-risk#primaryimage"},"thumbnailUrl":"http:\/\/www.smbtraining.com\/blog\/wp-content\/uploads\/2011\/04\/050111_0256_TradersAskH1.jpg","keywords":["breakout","pullback","risk"],"articleSection":["Adam Grimes's blogs","General Comments","Technical Plays","Trading Lesson"],"inLanguage":"en-US","potentialAction":[{"@type":"CommentAction","name":"Comment","target":["https:\/\/www.smbtraining.com\/blog\/traders-ask-how-to-manage-the-risk#respond"]}]},{"@type":"WebPage","@id":"https:\/\/www.smbtraining.com\/blog\/traders-ask-how-to-manage-the-risk","url":"https:\/\/www.smbtraining.com\/blog\/traders-ask-how-to-manage-the-risk","name":"Traders Ask: How to Manage the Risk | SMB Training","isPartOf":{"@id":"https:\/\/www.smbtraining.com\/blog\/#website"},"primaryImageOfPage":{"@id":"https:\/\/www.smbtraining.com\/blog\/traders-ask-how-to-manage-the-risk#primaryimage"},"image":{"@id":"https:\/\/www.smbtraining.com\/blog\/traders-ask-how-to-manage-the-risk#primaryimage"},"thumbnailUrl":"http:\/\/www.smbtraining.com\/blog\/wp-content\/uploads\/2011\/04\/050111_0256_TradersAskH1.jpg","datePublished":"2011-05-01T02:55:19+00:00","dateModified":"2011-05-01T22:14:40+00:00","breadcrumb":{"@id":"https:\/\/www.smbtraining.com\/blog\/traders-ask-how-to-manage-the-risk#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/www.smbtraining.com\/blog\/traders-ask-how-to-manage-the-risk"]}]},{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/www.smbtraining.com\/blog\/traders-ask-how-to-manage-the-risk#primaryimage","url":"https:\/\/www.smbtraining.com\/blog\/wp-content\/uploads\/2011\/04\/050111_0256_TradersAskH1.jpg","contentUrl":"https:\/\/www.smbtraining.com\/blog\/wp-content\/uploads\/2011\/04\/050111_0256_TradersAskH1.jpg","width":"629","height":"442"},{"@type":"BreadcrumbList","@id":"https:\/\/www.smbtraining.com\/blog\/traders-ask-how-to-manage-the-risk#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/www.smbtraining.com\/blog"},{"@type":"ListItem","position":2,"name":"Traders Ask: How to Manage the Risk"}]},{"@type":"WebSite","@id":"https:\/\/www.smbtraining.com\/blog\/#website","url":"https:\/\/www.smbtraining.com\/blog\/","name":"SMB Training Blog","description":"Lessons from the trading desk","publisher":{"@id":"https:\/\/www.smbtraining.com\/blog\/#organization"},"potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/www.smbtraining.com\/blog\/?s={search_term_string}"},"query-input":{"@type":"PropertyValueSpecification","valueRequired":true,"valueName":"search_term_string"}}],"inLanguage":"en-US"},{"@type":"Organization","@id":"https:\/\/www.smbtraining.com\/blog\/#organization","name":"SMB Training","url":"https:\/\/www.smbtraining.com\/blog\/","logo":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/www.smbtraining.com\/blog\/#\/schema\/logo\/image\/","url":"https:\/\/www.smbtraining.com\/blog\/wp-content\/uploads\/2022\/07\/Logo-e1658419502954.png","contentUrl":"https:\/\/www.smbtraining.com\/blog\/wp-content\/uploads\/2022\/07\/Logo-e1658419502954.png","width":230,"height":81,"caption":"SMB Training"},"image":{"@id":"https:\/\/www.smbtraining.com\/blog\/#\/schema\/logo\/image\/"},"sameAs":["https:\/\/www.facebook.com\/smbcap\/","https:\/\/x.com\/smbcapital","https:\/\/www.youtube.com\/user\/smbcapital"]},{"@type":"Person","@id":"https:\/\/www.smbtraining.com\/blog\/#\/schema\/person\/dc89886f611b7f43996f76d73a99c964","name":"Adam","url":"https:\/\/www.smbtraining.com\/blog\/author\/aceman"}]}},"_links":{"self":[{"href":"https:\/\/www.smbtraining.com\/blog\/wp-json\/wp\/v2\/posts\/11224","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.smbtraining.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.smbtraining.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.smbtraining.com\/blog\/wp-json\/wp\/v2\/users\/388"}],"replies":[{"embeddable":true,"href":"https:\/\/www.smbtraining.com\/blog\/wp-json\/wp\/v2\/comments?post=11224"}],"version-history":[{"count":0,"href":"https:\/\/www.smbtraining.com\/blog\/wp-json\/wp\/v2\/posts\/11224\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.smbtraining.com\/blog\/wp-json\/wp\/v2\/media?parent=11224"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.smbtraining.com\/blog\/wp-json\/wp\/v2\/categories?post=11224"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.smbtraining.com\/blog\/wp-json\/wp\/v2\/tags?post=11224"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}