Risk limiting strategies that don’t work - Singapore Forex Trading, Singapore Forex Academy, Singapore Forex Association

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Risk limiting strategies that don’t work

These approaches are so common I have given them their own pet acronyms.

IWI (“I’ll watch it”).

This means, “I check my positions several times a day and I’ll know if it’s time to get out.”
Yeah, right. Be prepared to “watch” your account deteriorate because your exit decisions will be emotional rather than carefully thought out in advance… or you may be walking your dog when something very significant to your position occurs.

ICGAL (“It can’t get any lower”)

“I’m right, so I’m going to ride out what’s sure to be a temporary setback.”
Wanna bet? (again, think Enron, AIG, and Lehmann Brothers to name a few examples of just how low it can go).

SIBSM (“So I’ll Buy Some More”)

Here we take ICGAL to the next level. It can’t get any lower (ICGAL), So I’ll Buy Some More (SIBSM)!
Some pundits try to sanitize this “strategy” by calling SIBSM “dollar cost averaging.” Again, at the risk of being repetitive, think Enron, AIG, and Lehmann Brothers.
When I was a broker, despite my best efforts at stopping them from doing it, I had some clients who employed all three… IWI, ICGAL, and SIBSM. Their accounts were relatively short-lived.