Providio Trading Consultants, Inc.
is an Introducing Broker in the Futures industry.
We were incorporated in Illinois in February of 2000.
We service the needs of experienced traders, assist new traders
in learning about Futures and how to trade them and provide
hedging services to business and individuals with price exposure
in listed commodity and financial futures contracts.
Edge-n. 5. 'A margin of superiority; an advantage'
~ American Heritage Dictionary
Trading futures, by its very nature, encourages the pursuit of an edge.
Individual traders usually try to obtain this advantage by addressing three
major issues: timing, transaction costs, and information access - we believe
they are missing the point.
Professional traders and money managers address one other crucial issue
before they even enter a trade: "What if I am wrong?"
This is risk management. By starting with it, they have already prepared themselves for a loss. Their use of risk management up front helps them
avoid the emotionally and financially devastating effects of catastrophic
losses - this is the professional trader's real edge.
While timing is the basis of all trading systems, it is never infallible. Even the advertising for many trading systems express their effectiveness in percentage terms. These percentages acknowledge the fact that systems will be wrong. If they can be wrong, they can be very wrong. Risk management allows a system to be very wrong without necessarily wiping out your trading account.
Many traders have also attempted to shrink transaction costs by obtaining
direct floor access, exploiting the speed of the Internet and electronic order
entry, and paring commission rates to the absolute minimum. While these
efforts do have an effect on a trading account's performance, they are strictly
limited and tend to be very small. Every trade has implied transaction costs in
addition to their commissions and fees. Losses are one of those costs. As the
largest portion of transaction costs, they deserve the most attention. Risk
management focuses a trader's efforts on minimizing these costs.
Individual traders have also tried to get 'the edge' with live audio or streaming
quotes, real-time news services, and other information and data sources.
These are tools used to make trading decisions. Trading decisions are informed
opinions about the market's direction. Emotions can often influence these
opinions. By limiting losses, risk management can prevent trade decisions from
being negatively influenced by irrational emotions.
So how can you possibly get 'the edge' in the futures markets,
where the cards often seem to be stacked against you?
We feel that professional traders and money managers approach it best.
Risk management is the one thing you can control:
They make risk management the centerpiece of their trading program and
recognize its impact on their performance. We do not underestimate the
importance of timing, transaction costs and access to information. However,
you cannot consistently control these factors.
These are all important elements of risk or money management.
- You control which markets you trade.
- You control how many contracts you trade.
- You control where to set your stop loss.
You must be your own money manager.