Japanese boat jump risk management technique
It can be applied to trading too, I tried to enbed the youtube video but i couldnt so i will just post screenshots
A Japanese man is rowing a boat with tourists when they get to a bridge that is very low, so the tourists bend their heads. The boat man cannot bend his head because he is holding a very long stick. So, he does something ingenious to manage the risk of him hitting his head on the concrete bridge.
He crosses the bridge by foot and jumbs back into the canoe from the other side of the bridge.
So many times as traders we are faced with a similar situation where danger is approaching and we dont know what to do so we panic and shift our stop loss to accomodate more danger. From this jaoanese technique, one way to manage the risk is to exit the position, and re-enter it when the danger clears.
Let us look at a practical example, on the charts there is an upward trend but after price crossed the pre-frankfurt hour high a bearish candle formed which shows a danger of reversal of trend just like the danger the bridge posed to the boat man. A way to manage this risk is to close the buy position (exit the boat), wait for price to close abover the red candle (cross the bridge on foot), then re-enter the buy position when it does( jump back into the boat). Hope this helps guys!
