Risk Management in Trading, Kenneth L. Grant
Most traders mistakenly believe that an investor's primary goal is to maximize profits.
However, the primary goal in trading is to reduce potential risks, as minimizing losses allows for stable profits.
This book was written by a true expert in this field, Kenneth L. Grant, a leading risk management manager at an investment firm.
This book will not only teach you the theoretical aspects of this topic but also provide insight into their practical application.
Summary of the book:
1. Investing in risk management – why risk management should be viewed as an investment, calculating risk amounts, and building insurance capital.
3. The structure of profits and losses over time – the concept of the unit of time on the basis of which the analysis is carried out and the degree of their influence on the current price.
4. Portfolio risk components – we assess the reliability of our portfolio by analyzing its individual components. Examples of calculation methods.
5. How to choose risk exposure levels (Rule 1) – Sharpe ratio, volatility management, drawdown and compensation of liabilities.
6. Portfolio risk regulation (Second rule) – calculation of the size of each position, selection of the economic sector for investment, diversification of investments.
7. Individual trade risk components – planning an individual trade taking into account the asset, time, commission, order type, and other important parameters. This also includes managing an existing position.
8. Key Takeaways – This section summarizes everything you've read in the previous chapters. Those who don't like to read a lot can limit themselves to this chapter :)
The book is well worth reading and will be of interest to virtually any investor, and practical examples will make its content more accessible.
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