Wednesday, 22 October 2008

Black Swan Rule Tweaked

Slight change to my Black Swan Rule - my new risk-control rule to deal with fat-tail risk. If the portfolio declines six percent in any four-week period, instead of closing all trades on the next weekly open, I will close all losing trades on the next weekly open and close winning trades if they experience a drawdown of greater than two percent. As I explained in a post yesterday, the new rule went into effect this week and I closed out all my trades, including one that was doing nicely. But in retrospect, I think it's better to give winning trades a little room to run. I explain the new rule and my other risk-control rules on my "How It Works" page

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