Which?

[wasp]

Quick one as its 2am, I am usually trading at this hour and so subsequently bored and just watched fast and the furious 4 and thinking of other really good brain numbing complete wastes of time, and here I am....!

Which comes first.... Be really honest with yourself here... When you start trading each week/day, or, when you run your figures through excel for the week ahead, or even, whilst in trades or about to enter, which really comes first?

Risk or reward?

Anyone can profit in the markets, and I do mean anyone, with just a few months experience and half a brain cell... Whether indicators or S/R, fundamentals or astrology... all the analysis in the world won't help you though if you put the wrong one first, so, which do you honestly put first?

As my sig says, having a clue helps, but its all down to risk and money management. Just that alone can make you rich!

 

[wasp]

Less is more...

Which is why, the 90% psychology is ridiculed by those who think first!

Be the tortoise! :cheesy:

 

[everyonerich]

thats good, i know what youre doing..

but another column shows you had capital from 20k down to 19, 672 at the end. theres no money to be made..

 

[Black Swan]

Quick one as its 2am, I am usually trading at this hour and so subsequently bored and just watched fast and the furious 4 and thinking of other really good brain numbing complete wastes of time, and here I am....!

Which comes first.... Be really honest with yourself here... When you start trading each week/day, or, when you run your figures through excel for the week ahead, or even, whilst in trades or about to enter, which really comes first?

Risk or reward?

Anyone can profit in the markets, and I do mean anyone, with just a few months experience and half a brain cell... Whether indicators or S/R, fundamentals or astrology... all the analysis in the world won't help you though if you put the wrong one first, so, which do you honestly put first?

As my sig says, having a clue helps, but its all down to risk and money management. Just that alone can make you rich!

Agreed, in simple terms if a day trader takes 20 'bets' a day, seven are losers, thirteen winners, losers lose 15 pips each, winners gain 30 pips each they're at the races. How difficult can this be?

 

[Crap Buddist]

Master, what is trade ?

Market first
Risk Second
Reward depends trader performance

Thats how it looks to me. Not anyone can just trade like that as it entails that the trader actually wants to learn reason or knowing behind his assessment of trading activity of the market and its participants and not just Swing Away.

Which is why I see Discretionary traders have a love of trading & system traders have a love of money.

And I think it would help individuals if they are honest and know what side they MUST pursue for themselves and what they as individuals want from being involved in trading....

I mean another question is DO YOU THINK THE MARKETS ARE RANDOM ?

If yes then one can save a lot of headaches and swing away at any old strat and use best money management to aid non implosion. If No then one , I suggest, needs to dedicate time to the study of the markets to gain expertise through knowing.

There is THE way to trade, but that way will only be known to those who ask the question...


ohhmmmm oohhmmmmm.... ohhmmmmmm. :cheesy:




I hope users appreciate my use of Bold type ,Italics and underline in the post above !

I like to make effort now and then... good day !

 

[wasp]

everyonerich, blackswan ...

You seem unable to grasp my extremely simple point.

CB,

Check you PM's mate

 

[Hotch]

Neither.

They're functions of each other and so should be looked at together.

 

[trendie]

simple questions make you think, dont they.

I first thought risk, as its the only component I have any real control over.

But then I thought it must be reward.
Since, whether you take the risk, it would be function of the anticipated minimum / conservative reward to make the trade worthwhile.

I went for reward. as it sets the framework to the amount of risk you need to take, and thus the viability of a trade.

do I get a PM as well?

EDIT: Hotch said in one sentence what I rambled on for several. (we were writing at same time, it seems)

 

[karl6666]

look after the losses

Which is why, the 90% psychology is ridiculed by those who think first!

Be the tortoise! :cheesy:

Morning Wasp

The spreadsheet looks like a bad day at the office / spare bedroom. 15 losers / 5 winners. I would say keep the losses the priority first, if the deal moves in the wrong direction, if the stop is tight so what wait for the next one, or half the trades and load up the more 'dead certs'

Karl

 

[Trader333]

I always consider risk first when trading but that is not the case though when buying a lottery ticket as I am much more interested in the reward


Paul

 

[Hotch]

The spreadsheet is kinda pointless I feel. If you replaced the 6% bit with 2.5%, we'd suddenly be seeing that risking more is better.

You should risk Kelly if you can figure it out, provided that it doesn't effect your trading and you are consistent.

To conclude:

2am is for sleeping and/or drinking (I'm sure it's possible to do both!).

 

[Joey25]

The most important performance metric by far is the expectancy ratio:

[win% x (average win / average loss)] - [1-win%],

so if you risk 100 pips to get 300 on average, with a 50% win rate:

expectancy = 1.0

whereas if you risk 15 pips on average to get 15, with a 70% win rate:

expectancy = 0.4

As Hotch says in post #7, it is this complex interrelationship which matters.

However, strictly speaking the first calculation for me is the initial risk because it determines how many positions I can run concurrently, and I use it for drawing a line in the sand for trade management once in a trade (!)

I just don't want people falling into the trap of thinking it's all about tight stops, when in my experience (in general trading breakouts from balance and trying to catch a trend), going for homeruns and having the courage to hold a postion for days is the thing which is truly getting results.

 

[wasp]

Neither.

They're functions of each other and so should be looked at together.

simple questions make you think, dont they.

I first thought risk, as its the only component I have any real control over.

But then I thought it must be reward.
Since, whether you take the risk, it would be function of the anticipated minimum / conservative reward to make the trade worthwhile.

I went for reward. as it sets the framework to the amount of risk you need to take, and thus the viability of a trade.

do I get a PM as well?

EDIT: Hotch said in one sentence what I rambled on for several. (we were writing at same time, it seems)

True, they are connected and one should look at both consecutively but, I thought anyhow, the spreadsheet outlines that, the trader who took the higher risk trades, suffered more at the end and during.

The spreadsheet is kinda pointless I feel. If you replaced the 6% bit with 2.5%, we'd suddenly be seeing that risking more is better.

Err, yes, this is my point exactly!

You should risk Kelly if you can figure it out, provided that it doesn't effect your trading and you are consistent.

To conclude:

2am is for sleeping and/or drinking (I'm sure it's possible to do both!).

Not wrong there, but when one is dedicated to their business, they are up for the 'Asian' session regardless, even on a Saturday night to keep in Sync!

The most important performance metric by far is the expectancy ratio:

[win% x (average win / average loss)] - [1-win%],

so if you risk 100 pips to get 300 on average, with a 50% win rate:

expectancy = 1.0

whereas if you risk 15 pips on average to get 15, with a 70% win rate:

expectancy = 0.4

As Hotch says in post #7, it is this complex interrelationship which matters.

However, strictly speaking the first calculation for me is the initial risk because it determines how many positions I can run concurrently, and I use it for drawing a line in the sand for trade management once in a trade (!)

No one knows for sure the outcome of any given trade and thus negates the 000% win rate.

I just don't want people falling into the trap of thinking it's all about tight stops, when in my experience (in general trading breakouts from balance and trying to catch a trend), going for homeruns and having the courage to hold a postion for days is the thing which is truly getting results.

I'm not arguing the benefits of tight stops here though...

Many traders I know have issues through the bullsh1t 'trading is 90% psych' crap and which is why, imo, EQUAL time should be spent studying excel as they do the charts.

Which trader had the worst end result and which one would have had more psych issues? Approach this business sensibly and correctly, putting risk before reward, one not only succeeds financially, they can also stop being big girls and blaming it on psychology and leave that sh1te to Dr Phil.

 

[Joey25]

True, they are connected and one should look at both consecutively but, I thought anyhow, the spreadsheet outlines that, the trader who took the higher risk trades, suffered more at the end and during.



Err, yes, this is my point exactly!



Not wrong there, but when one is dedicated to their business, they are up for the 'Asian' session regardless, even on a Saturday night to keep in Sync!



No one knows for sure the outcome of any given trade and thus negates the 000% win rate.



I'm not arguing the benefits of tight stops here though...

Many traders I know have issues through the bullsh1t 'trading is 90% psych' crap and which is why, imo, EQUAL time should be spent studying excel as they do the charts.

Which trader had the worst end result and which one would have had more psych issues? Approach this business sensibly and correctly, putting risk before reward, one not only succeeds financially, they can also stop being big girls and blaming it on psychology and leave that sh1te to Dr Phil.

I'm disappoined you dismissed the expectancy calculation with "No one knows the outcome of the next trade", but there again it doesn't surprise me as I don't fall into an acceptable trading clique.

Psychology? Couldn't give a flying ****

 

[wasp]

I'm disappoined you dismissed the expectancy calculation with "No one knows the outcome of the next trade", but there again it doesn't surprise me as I don't fall into an acceptable trading clique.

Psychology? Couldn't give a flying ****

I don't know anything about your trading day to day mate but very few will achieve the same number op points/pips on each trade to be sure of their expected return. Even those who use targets and know what they aim for cannot be sure...

One thing all traders can be sure of is their stoplosses and they may take a run of bad decisions over a week and that, is what one needs to be preparing for as once done, the reward is inevitable, with the risk controlled.

Glad to read your second line though!

 

[Joey25]

Hmmm, maybe you're right. If you effectively go for infinite return with at least part of your position, you never truly know your average return, because you're always limited by your historical sample.

Plus, the biggest winner may only come around once a year.

I do wonder how many people are falling into the 1-1 with a 70% win rate trap though?

 

[new_trader]

2 cents

I just don't want people falling into the trap of thinking it's all about tight stops, when in my experience (in general trading breakouts from balance and trying to catch a trend), going for homeruns and having the courage to hold a postion for days is the thing which is truly getting results.

Trap?? If it wasn't for tight stops I would have been out of the game a long time ago. Tight stops allow a trader to stay in the game long enough to be become proficient. As you you become more proficient with your entries a number of things begin to happen.

1) Your positions move immediately into profit after entry
2) Your stops get hit less often
3) You make more profit/trade

This isn't an opinion, it is a fact.

End of story.

 

[chump]

Psychology isn't bullshti wasp.

1.Psychology is understanding your tolerances for risk and your ability to manage it within those tolerance even though those tolerance may change over time as you develop as a trader.
2.This is not a one off event.It is an ongoing process.
3.Psychology is understanding that one's ability to to do 2 is subject to flaw in itself because as success can beget success it can also beget grand failure as one's tolerances lose touch with the objective element of assessing risk..ie ..the data that arises out of your trading. For want of a better term let's call this psychology the ability to retain emotional balance.


All I do is manage risk before and during a trade.During a trade being the risk of balancing how much should be on the table. I don't know what the reward will be and neither does anyone else.They guesstimate it and if their system is robust they can do that within certain parameters that are meaningful ,in terms of edge, to the risk initially accepted.
Managing risk during a trade will probably change as you develop as a trader.If you are succeeding this part of your skillset will probably be the part that contributes most as you will find your ability to manipulate position size and expand your risk tolerance changes in a way that relates to objective data of your trading.

"Tight" is a relative term and has no meaning other than as it relates to the profile of the instrument you are trading.

 

[wasp]

As ever chump, I think we are both looking at this 'psychology' from completely different POV's.

As per you end your second paragraph, its the ability to retain emotional balance through, by firstly assessing ones risk tolerance and adjusting to it, prior, and managing it during.

Thats not psychology in my book, not in the context of the BS statistics, thats an intelligent, sensible business mathematical approach so one trades coldly and clinically without having a Spanish style heart attack when they have 3 losses in a row or a move goes 10 ticks offside.

I'm sure Tony is in the background typing furiously to negate all views and other something completely different though!

 

[new_trader]

I use "tight" generally to mean it is proportional to the skill of the trader and not based on market gyrations, previous highs, lows..etc