Something wrong...

This is a discussion on Something wrong... within the General Trading Chat forums, part of the Reception category; Originally Posted by Atilla It's the risk / reward management that makes the difference. That is a crutch used by ...

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Old Jun 4, 2011, 1:33am   #8
Joined May 2011
Re: Something wrong...

Quote:
Originally Posted by Atilla View Post
It's the risk / reward management that makes the difference.
That is a crutch used by people who wish to delude themselves that they are not gambling. Ask any real gambler - horses, casinos, sports, etc - the smart ones will tell you that if a 'system' doesn't work on level staking, it doesn't work. All of this attention to "money management", risk:reward numbers pulled out of the air - all of it is simply self delusion.

A professional posture will include appropriate position sizing. This means not being overleveraged. In a professional arena, such as a futures exchange, the margins are set at more sensible levels than for example spread betting companies. There are also position limits and liquidity considerations for larger players.

For an amateur, position sizing should be in place to reduce the risk of ruin. Without this, any other efforts are irrelevant as the trader will eventually blow up. However, without a robust strategy in place to take net points from the chosen markets each day, position sizing will not make a trader successful.

All of this is obvious, however the masses persist in attempts to control their gambling and limit losses. It is a crutch to avoid responsibility for haphazard, hit-or-miss trading or more accurately guesswork. Provided the gambler has rationalised affording to lose, he can continue.

The people who indulge in circular discussions with made up risk:reward numbers most likely don't understand the true probabilities of what they are trading. Without this knowledge in place, the numbers are all fantasy.

These terms are marketed to the class of wanabee "traders" - who wish to distinguish themselves from the mere gamblers. Therefore there must be mathematical systems, sophisticated financial terms, and other such props. The nature of the activity is the same - uninformed gambling - but a respectable veneer is added to attract the professional and managerial classes.

kimo'sabby makes a very good point about use of language. Consider the spread betting companies who brand themselves as "spread trading" companies. Consider the nature of the marketing.
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Old Jun 4, 2011, 2:29am   #9
 
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Joined Dec 2009
Re: Something wrong...

good stuff hoodoo

It really is a form of gambling in my opinion.

If you buy an outright long position, you are 'betting' that someone else will buy it off you at a higher price later.

All of the people that buy after you are betting exactly the same thing.

Can we call it behavioural analysis gambling?
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Old Jun 4, 2011, 5:44am   #10
Joined Jun 2011
Re: Something wrong...

It's gambling if you place your bet and hope it will go your way. It's less than gambling if you place your bet and know what to do if it doesn't go your way. I know of people who are willing to go down with the ship. Now, that's gambling.
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Old Jun 4, 2011, 9:07am   #11
Joined Jun 2011
Re: Something wrong...

Quote:
Originally Posted by JRP2891 View Post
No way, 50/50 each trade, it's going to go one way or the other. Just got to get on a hot streak and pile on the size when you feel lucky.
Hi there Look at BUY / SELL options

Buyers LOSE 85% of the time therefore SELLERS must WIN 85% of the time.

The Big BUYERS of options are institutions who use these to "protect" themselves from large losses. They can also WIN BIG too -- so for them the risk is worth it.

This is where it makes HUGE sense for the smaller / individual investor to take advantage of this by SELLING the options.

This is the nearest you are likely to come to a "Perpetual Motion" money machine anywhere in the known universe.

The option SELLER is working a bit like the CASINO OPERATOR -- you don't win HUGELY but you make a decent %'ge on loads and loads of trades.

The Casino usually doesn't care if punters make 10 or 1,000,0000 USD so long as they AVERAGE a % take per punter --

Who'se ever heard of a CASINO going bust.

I'd advise any trader to look at OPTIONS TRADING -- it's hugely mis-understood and WRONGLY considered as very risky trading.

Cheers
jimbo
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Old Jun 4, 2011, 9:46am   #12
Joined Nov 2001
Re: Something wrong...

Quote:
Originally Posted by jimbo45 View Post
Hi there Look at BUY / SELL options

Buyers LOSE 85% of the time therefore SELLERS must WIN 85% of the time.

The Big BUYERS of options are institutions who use these to "protect" themselves from large losses. They can also WIN BIG too -- so for them the risk is worth it.

This is where it makes HUGE sense for the smaller / individual investor to take advantage of this by SELLING the options.

This is the nearest you are likely to come to a "Perpetual Motion" money machine anywhere in the known universe.

The option SELLER is working a bit like the CASINO OPERATOR -- you don't win HUGELY but you make a decent %'ge on loads and loads of trades.

The Casino usually doesn't care if punters make 10 or 1,000,0000 USD so long as they AVERAGE a % take per punter --

Who'se ever heard of a CASINO going bust.

I'd advise any trader to look at OPTIONS TRADING -- it's hugely mis-understood and WRONGLY considered as very risky trading.

Cheers
jimbo
Look VERY closely at it, because it will trap the get rich quick trader. I left it more than ten years ago. I had started to make money on it, then, but the way I did it was too slow for my taste. I switched to the more classical straight trading..

I found that the best way, for me, at that time, was to buy the very long dated options
because they move more closely with the share price. There will come a point when the time will start to waste away. You should have made money on call options, by then, but, in any case get out of that option because you will be entering the part where the writers hope to make money on them. You will know by practice when that time arrives- a few weeks from expiry, but I can't remember now.

I am very unsophisticaed in this regard, believing in straight buys, no straddles, etc. The more complicated the set-up the more expensive in brokers fees it all becomes.


Anyway, that's my 2 cents worth. Remember that the brokers are waiting for suckers in this market. Study it well, before entering.
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Old Jun 4, 2011, 10:14am   #13
Joined Apr 2006
Re: Something wrong...

Quote:
Originally Posted by jimbo45 View Post

Who'se ever heard of a CASINO going bust.
If you are ever in Malta I could introduce you to a few who spunked the odd 20 million up the wall "investing" in online gaming businesses

Failing that you could do some research and find out how many of these types of buisnesses register and are no longer operating 2 years down the line.
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Old Jun 4, 2011, 10:23am   #14
Joined Jul 2003
Re: Something wrong...

Quote:
Originally Posted by hoodoo man View Post
That is a crutch used by people who wish to delude themselves that they are not gambling. Ask any real gambler - horses, casinos, sports, etc - the smart ones will tell you that if a 'system' doesn't work on level staking, it doesn't work. All of this attention to "money management", risk:reward numbers pulled out of the air - all of it is simply self delusion.

A professional posture will include appropriate position sizing. This means not being overleveraged. In a professional arena, such as a futures exchange, the margins are set at more sensible levels than for example spread betting companies. There are also position limits and liquidity considerations for larger players.

For an amateur, position sizing should be in place to reduce the risk of ruin. Without this, any other efforts are irrelevant as the trader will eventually blow up. However, without a robust strategy in place to take net points from the chosen markets each day, position sizing will not make a trader successful.

All of this is obvious, however the masses persist in attempts to control their gambling and limit losses. It is a crutch to avoid responsibility for haphazard, hit-or-miss trading or more accurately guesswork. Provided the gambler has rationalised affording to lose, he can continue.

The people who indulge in circular discussions with made up risk:reward numbers most likely don't understand the true probabilities of what they are trading. Without this knowledge in place, the numbers are all fantasy.

These terms are marketed to the class of wanabee "traders" - who wish to distinguish themselves from the mere gamblers. Therefore there must be mathematical systems, sophisticated financial terms, and other such props. The nature of the activity is the same - uninformed gambling - but a respectable veneer is added to attract the professional and managerial classes.

kimo'sabby makes a very good point about use of language. Consider the spread betting companies who brand themselves as "spread trading" companies. Consider the nature of the marketing.
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