Volatility only factor for trade being risky???

[fmjvertigo123]

Hey guys am I right in thinking that the volatility your trading the more risk in losing your capital. Is that the only factor of being risk???

If so what would use guys say is the safest things to trade to the most volatile in order???(I'm thinking in terms of forex, stocks, cfd's etc)

 

[Rhody Trader]

There's no such thing as a "safest market" to trade. Your risk is mainly determined by how you trade, not by the market you trade.

To answer your question regarding comparative volatility, though, give this a read: Looking at Volatility Across Markets.

 

[Masquerade]

No. Leverage.

 

[new_trader]

No. Ignorance.

 

[Masquerade]

Ignorance is bliss.

 

[scose-no-doubt]

I wish I could rep you 100 times masq.

 

[meanreversion]

Ignorance of the difference between "your" and "you're" is not bliss.

 

[fmjvertigo123]

ok. thanks for the link rhody.

 

[tomorton]

Volatility is equally risk to the upside so not a bad thing in itself, it's more a measure of speed, i.e. how many or how few trades it will take to double or halve your account.

e.g. 5 trades from £1,000 in market with high volatility with 100 pips gain or loss per trade - you could halve or double account in 5 trades. Or, 10 trades from same account in market with low volatility with 50 pips gain or loss per trade - you could halve or double your account in 10 trades.

But volatility alone does not tell you which is more likely. The fact that one system requires half as many straight winners or losers to halve or double account does not make winning or losing using that market more likely, it depends on the trades. Falling from a cliff 1,000ft high is not safer than falling from a cliff 500ft high, it just delays the inevitable.

More important to know how likely your trades are to be winners or losers and how you can optimise that ratio.

 

[fmjvertigo123]

so really the lesson here is for high volatility, you need bigger percentage winners than losers. rather than big profit winners and alot of small losers. so the turtle system wouldnt be a good idea here then. i'm more of a position trader than a day trader really.

 

[tomorton]

so really the lesson here is for high volatility, you need bigger percentage winners than losers. rather than big profit winners and alot of small losers. so the turtle system wouldnt be a good idea here then. i'm more of a position trader than a day trader really.

No not really, I've no personal experience using theTurtles' method, only to say that a high percentage of winners is better in any system, whether trading a high volatility market or not, and a higher volatility market does not alter that guideline. What it does suggest is that your stake will be smaller in a high volatility market so that the % loss from your account if your stop is hit will remain at 2% or some other level that will allow you to carry on trading through a run of losses.

e.g. You have your £1,000 account and you're spreadbetting the FTSE to go up, allowing a stop-loss of -50pts. You have decided your maximum acceptable loss from your account should be 5% per trade, i.e. £50, so your biggest stake should be £1 per point. In a lower volatility period of the FTSE, you might be able to enter a trade with a 25pt stop, so you could then stake £2 per point.

 

[tomorton]

But I must also say, it's no bad thing to work through stuff like this before you commit hard-earned money.

 

[fmjvertigo123]

thanks tomorton. that was killer advice. appreciate it.

what are the advantages of certain markets? i know some people only trade forex, some commodities. why is this? shouldnt a trading system be profitable in all markets?

 

[meanreversion]

No not really, I've no personal experience using theTurtles' method, only to say that a high percentage of winners is better in any system, whether trading a high volatility market or not, and a higher volatility market does not alter that guideline. What it does suggest is that your stake will be smaller in a high volatility market so that the % loss from your account if your stop is hit will remain at 2% or some other level that will allow you to carry on trading through a run of losses.

Turtle method has very low % win rate, possibly below 30. There are occasions when it returns spectacular gains, so it can't be dismissed. However, one needs to weigh this against the psychological difficulty in following such a system.