The Handbook of Technical Analysis + Test Bank_ The Practitioner\'s Comprehensive Guide to Technical Analysis ( PDFDrive )

Trader Risk Profiling and Position Analysis

Now refer to Figure 26.2. We see that if we further decide to buy in at Point

4 after confirming the upside pullback from the downtrend line, our participation

would be categorized simply as conservative in time but aggressive in price.

At this juncture, it is important to realize that the determination of whether a par-

ticular entry is risk seeking or risk averse is essentially a comparative measure. For ex-

ample, an entry or exit is only considered risk seeking or risk averse when compared

to another entry or exit, with respect to time and price. It is strictly a relative measure.

Let us now consider the case for short entries. Please refer to Figure 26.3. If we

shorted at Point 1 at $110, we would be categorized as being risk seeking or ag-

gressive with respect to the time of entry since we have no confirmation that price

has reversed or been thrown back off the uptrend line AB. At the same time, we

would also be regarded as risk averse or conservative with respect to the price on

entry since we shorted at a much higher and therefore more favorable price. Entry

at Point 2 at $100 would be regarded as risk averse or conservative with respect to

Figure 26.2 Risk Profile for Long Entries.

Figure 26.3 Risk Profile for Short Entries.