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risk reward My soap box words. Will try to stick to trading talk in future.


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#1 traderx

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Posted 10 December 2020 - 12:04 PM

I always find it interesting when some one takes a very  limited view from "small" number of personal facts, compared to scientific studies and facts.

 

Examples are Uncle who drank 5 bottles of whiskey, slept 1 hr a night, smoked all day and lived to be 105.

Another are 3 friends who waled across super highway every day for 3o years, never got hit.

Personal experience is of 1 or 2, is not scientific, many love to brag about beating the odds.

Many who got very sick or died were young or great shape.

Risk reward is important in trading but also in life!!! 

 

 

Would appreciate any replies. I like to learn.



#2 12SPX

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Posted 10 December 2020 - 12:12 PM

Good words!!! 



#3 dwnowhere1

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Posted 10 December 2020 - 12:31 PM

While for the most part I agree, when one is dealing with the markets even lot of statistics may not help.

One can slice and dice the numbers all day long -- say this day of this week of this month has gone up 65 % of the time.

While one may think this skews the odds in one favor, when that day arrives and the market does the opposite, causing

the odds to change slightly, one most likely lost money if they went with the original 65% odds.


Edited by dwnowhere1, 10 December 2020 - 12:32 PM.


#4 traderx

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Posted 10 December 2020 - 12:50 PM

While for the most part I agree, when one is dealing with the markets even lot of statistics may not help.

One can slice and dice the numbers all day long -- say this day of this week of this month has gone up 65 % of the time.

While one may think this skews the odds in one favor, when that day arrives and the market does the opposite, causing

the odds to change slightly, one most likely lost money if they went with the original 65% odds.


Edited by dwnowhere1, Today, 12:32 PM.

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Agree completely. Related to this recently   I twice mentioned  "gamblers fallacy" on this subject. If black comes up 12 times in a row chance still 50% of red  or more of black. I know 0 and oo are also in roulette. Related to this stock or index is way overbought, does not mean it cannot become more overbought. Two great systems I knew years ago, waited for overbought to enter the trade, looking  for more overbought.

Usually in first course in statistics coin coming out heads or tails, is used as the example.

Some of you, I am sure  know about long tails in standard deviation.

 

 

 



#5 dwnowhere1

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Posted 10 December 2020 - 01:11 PM

 

Two great systems I knew years ago, waited for overbought to enter the trade, looking  for more overbought.

Lot of people developed lot systems over the years. 

IMHO most only work in the short run until the market adapts.

The only people making money consistently are the Exchanges and the Data/Order brokers who

are charging each of us to "Take a Chance".

Believe I read that this year (or may of been last year) that Linda Raschke of "New Market Wizards" fame had blown out.

If true, she had a long run, until she didn't.



#6 12SPX

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Posted 10 December 2020 - 01:25 PM

This is why over my 35 plus years have always said, the market never goes up forever and the market never goes down forever.  I don't care what system there is out there no one really knows where its going to go thus everyone needs to respect each others opinion no matter how out there they are.  This being said is also why for 35 plus years I've concentrated on selling out of the money options on the SP500 on both sides of where I don't think the market will be in the next cycle.  When it comes to day trading all I use is stochastics and my tape watching experience.



#7 dwnowhere1

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Posted 10 December 2020 - 02:02 PM

 

the market never goes up forever and the market never goes down forever.

....

no one really knows where its going to go

I agree with that.   The KEY is does one have the capital to hold on until it comes back if you're on the wrong side.

My biggest problem has always been when I've been on the wrong side of the trade and HOPE kicked in.



#8 12SPX

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Posted 10 December 2020 - 02:12 PM

That's the advantage of selling on both sides, for sure one will be a winner and most likely they both will depending on your risk allowance.  This past cycle's numbers were 3900, 4000 for the upside, 3200 downside, expiration is next week looking pretty good so far.  Now of course you can go in further out both sides and make money at it.



#9 traderx

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Posted 10 December 2020 - 03:12 PM

I agree with that.   The KEY is does one have the capital to hold on until it comes back if you're on the wrong side.

My biggest problem has always been when I've been on the wrong side of the trade and HOPE kicked in.

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My problem has been to able to stick with it, emotions get me,sleeping and night, I fold too soon the last 60 years, and do not stick with a trade. Also I look at too many ideas, and perfection. Like thinking having 3 different language teachers teach you French is better than one.

 



#10 q4wer

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Posted 10 December 2020 - 03:30 PM

That's the advantage of selling on both sides, for sure one will be a winner and most likely they both will depending on your risk allowance.  This past cycle's numbers were 3900, 4000 for the upside, 3200 downside, expiration is next week looking pretty good so far.  Now of course you can go in further out both sides and make money at it.

when did you start your position for next week expiration?   basically how far out do you short options when you initiate short positions