Risk 5% per trade and you have a 99% chance of 50% drawdown in next 5 years

[*JDR*]

**snip**

What I am arguing against is *JDR*'s very narrow and incorrect view of risk management which is based on a limited understanding of what trading is.

Do you know anything about my trading to make such comments?

I am ever willing to learn... so please oh guru.... teach us....

You are obviously trading for a living then...?

perhaps running your own hedge fund?...

your most learned advice would be welcome....

 

[robster970]

Rob,

I'm not making any assumption about method, I'm simply saying that your risk should be based on the probability of the trade being a winner and how profitable that trade is likely to be. That doesn't require any information about method in order to be universally true.

If a retailer is trading/gambling under the conditions you describe, then their risk per trade should of course be absolutely tiny, and possibly static. In fact, realistically, your risk per trade should be 0% because you shouldn't be trading at all.

What I am arguing against is *JDR*'s very narrow and incorrect view of risk management which is based on a limited understanding of what trading is.

I understand what you and Arabian are saying and I also agree with it. LIke I said, you assess your own risk per trade based upon what you know. Most retailers want to stick with a 'system' that has positive expectancy over a statistically significant period, other more discretionary types will trade in a more fluid manner including varying their risk. All depends where you are on the evolutionary scale.

 

[arabianights]

If that were the case.....

who is taking the other side?

No one would take the other side so there would not be a trade.

It is a 100% certain loss for them.

People who've left orders in. Sucks to be them.

I can't believe you're even arguing this, it's insane. If the bank of england raise rates at 12 o clock out of the blue I am going to take out as many bids on sterling fixed income as I can. There is no way I will lose money.

 

[Paul71]

Nothing is 100% sure.


Here's my theory, for what it's worth. Yesterdays equity rally, that was 100% sure to come, not least because of the 30 day volume siganature. As soon as i flicked on the old charts yesterday i knew that the bounce was upon us. Did i go in 100%? I never, but that is my problem and not the markets problem.


Psychology is what separates us all, it can turn a good trader into a bad trader. Two traders can have the same technical ability, one becomes a billionaire the other only ever turns over a modest amount. The trader who becomes the billionaire is not necassarily a reckless gambler.


Psychology/character/personality is the difference and not mathematics. Just my theory and not meant to be an absolute.

 

[arabianights]

Nothing is 100% sure.


Here's my theory, for what it's worth. Yesterdays equity rally, that was 100% sure to come, not least because of the 30 day volume siganature. As soon as i flicked on the old charts yesterday i knew that the bounce was upon us. Did i go in 100%? I never, but that is my problem and not the markets problem.


Psychology is what separates us all, it can turn a good trader into a bad trader. Two traders can have the same technical ability, one becomes a billionaire the other only ever turns over a modest amount. The trader who becomes the billionaire is not necassarily a reckless gambler.


Psychology/character/personality is the difference and not mathematics. Just my theory and not meant to be an absolute.

What if a nuclear bomb went off?

 

[virtuos0]

If that were the case.....

who is taking the other side?

No one would take the other side so there would not be a trade.

It is a 100% certain loss for them.

How do you know the traders on the other side are trading for immediate profit? There are many groups of people using market for reasons other than speculation. Asset exchangers, hedgers, investors..

 

[Paul71]

What if a nuclear bomb went off?

Where? If it went off in Wales it would not matter.

 

[virtuos0]

..the concept of 'expectancy' is also retarded, but lets not get into that eh

 

[arabianights]

Where? If it went off in Wales it would not matter.

One can only hope and pray one does

Or just biological warfare amongst sheep.

 

[Paul71]

One can only hope and pray one does

Or just biological warfare amongst sheep.

I have a holiday motto, "If all else fails, try Wales". Luckily i have no use for my motto.

 

[*JDR*]

..the concept of 'expectancy' is also retarded, but lets not get into that eh

You have an opportunity to educate some of us. You obviously think I need it.

And I agree. I hope I never know everything.

So.... your 100% winner please explain what your strategy would be for a 100% winner and what actions you would take.. what is the trade size - 100% or more of account?

So what if it drops 5%
What if it drops 10%
what if it drops 20%

Also just so we understand you a little better... do you trade for a living? Employed or for yourself?


Thanks.

 

[morgan_edge]

What is the best method for finding your win/loss ratio etc, and over how many trades/markets timeframes etc??
Is one supposed to test for results over their setup going back to when trading began over as many instruments as possible, or do I just take the stats from the trades ive taken so far?
(as you can see i have never delves into backtesting mainly due to my total lack of pragramming ability)

 

[*JDR*]

What is the best method for finding your win/loss ratio etc, and over how many trades/markets timeframes etc??
Is one supposed to test for results over their setup going back to when trading began over as many instruments as possible, or do I just take the stats from the trades ive taken so far?
(as you can see i have never delves into backtesting mainly due to my total lack of pragramming ability)

Morgan,

You win/loss is for your trades.....

Backetsting will just show you the theoretical stats and you can use this theory in your plan......

if the reality is different..... change your plan....

 

[Paul71]

Retail money does not effect the market, therefore retailers can either read the market or they can not. Is this statement true?

 

[Hoggums]

People who've left orders in. Sucks to be them.

I can't believe you're even arguing this, it's insane. If the bank of england raise rates at 12 o clock out of the blue I am going to take out as many bids on sterling fixed income as I can. There is no way I will lose money.

And if 2 mins later they announce another £375bn of QE?

Never say never. In these circumstances the reward warrants the extra risk - but it is still risk - it's never certain. Trade long enough and one day you will lose a lot of money trading this method.

The problem is that perceived risk never equals actual risk.

 

[arabianights]

And if 2 mins later they announce another £375bn of QE?

Never say never. In these circumstances the reward warrants the extra risk - but it is still risk - it's never certain. Trade long enough and one day you will lose a lot of money trading this method.

The problem is that perceived risk never equals actual risk.

Ok, so what if I call it 100.0% safe

 

[N Rothschild]

this is amusing

 

[Trader333]

If you were 100% certain of a trade going your way it would be completely logical to risk 100% of your account. How much you risk should depend on the likelihood of the trade being a winner, and your judgement of the likely returns from the trade.

If I knew that a trade I was about to take was 100% certain then I would be trading my entire account plus anything I could borrow. For me that is obviously not the case and like others have said I risk an amount that I am comfortable to lose.


Paul

 

[*JDR*]

this is amusing

that's not very helpful is it?

why bother posting that?

 

[Paul71]

If I knew that a trade I was about to take was 100% certain then I would be trading my entire account plus anything I could borrow. For me that is obviously not the case and like others have said I risk an amount that I am comfortable to lose.


Paul

That's just it Paul, it's not the market that's unstable, it's us people. We (us on this thread) could all watch a particular market today, and that particular market will go about it's usual business wether we take part or not. Risk is in the eye of the beholder.