Continue reading...A common perception among the general retail investing and trading public is that in order to garner large profits, you must take on big risk. So where does this view come from? Who perpetuates it? And is it necessarily true that low risk trading isn’t possible?
Can Low Risk Trading Result in High Profit? This view comes from the fact that most people perceive volatility and leverage as high risk. Therefore, if one engages in the markets during periods of high volatility using a leveraged product, the odds are very low (high risk,) but the profits can be huge if things work out. This is the common perception. In essence, the belief is that because most people are risk-averse they should settle for only mediocre returns as higher returns are only reserved for those willing to take on higher risks.
I’m sure most of you know that a belief system is not always created on the basis of factual information, but sometimes on a lack or distortion of information. In other...
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