If you're not able to minimize the risk of taking a loss on any particular trade to less likely than one in six (and I know I've never been able to do that), your risk in playing the hypothetical game is <b>less</b> than you face ordinarily in the market already. The odds are wildly in your favor and you don't go for it just because the format is different- dice rolling instead of financial instrument trading? You can probably see how one might consider that illogical.
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A mind game
- Thread starter Rearden Metal
- Start date
If you're not able to minimize the risk of taking a loss on any particular trade to less likely than one in six (and I know I've never been able to do that), your risk in playing the hypothetical game is <b>less</b> than you face ordinarily in the market already. The odds are wildly in your favor and you don't go for it just because the format is different- dice rolling instead of financial instrument trading? You can probably see how one might consider that illogical.
Quote from Rearden Metal:
If you're not able to minimize the risk of taking a loss on any particular trade to less likely than one in six (and I know I've never been able to do that), your risk in playing the hypothetical game is <b>less</b> than you face ordinarily in the market already. The odds are wildly in your favor and you don't go for it just because the format is different- dice rolling instead of financial instrument trading? You can probably see how one might consider that illogical.
All that kind of ratio,risk per trade,chances,probabilities,odds,etc are a scenario for the Dreamworks Studios.
Take a trade,and when it goes against you,you`ll notice that it is suddenly an unknown territory for you.What are you gonna do?Let me tell you,even the most greatest 'odds' sometimes fail.
Quote from Josef K:
Since the odds are so in my favor, I say what the hell, 40%. If I lose I still have 60% left and a year to try to get back the 40% before my next roll of the die.
You picked the same as me, while everyone else chose to wager far less (so far). Note that there's no precise 'right answer' here, although I can't see any good reason for a professional trader to ever want to pass up on playing at all.
----------------------------------------------------------------------------------Quote from Josef K:
Since the odds are so in my favor, I say what the hell, 40%. If I lose I still have 60% left and a year to try to get back the 40% before my next roll of the die.
Be careful you forget you can not just lose 40% if the six is your roll. Then you have zero. Zero money for one year. Then you can play again with $500,000. So what will you do in one year with no money?
Too if the money is $500,000 for the bet, but you have really less in the real life, then for example 10% loss is $50,000. But you really do not have $450,000 safe if in real life you only have maybe $200,000 for example. Then really you lose 25% not 10%
Quote from Rearden Metal:
This question came up in a discussion between traders on how much to push into the pot when you finally find that special once-a-year market scenario where you get that maximum-conviction, 'perfect setup' type of trading opportunity. So it's not all that hypothetical after all...
That scenario is not exactly similar to trading. If I go all in and the die comes up six then I WILL lose everything. But in trading if I go all in and the trade goes bad, I can still get out with some/most of my money.
Quote from trendlover:
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Be careful you forget you can not just lose 40% if the six is your roll. Then you have zero. Zero money for one year. Then you can play again with $500,000. So what will you do in one year with no money?
No, you've misread/misunderstood the rules of the game. I only bet 40% ($200,000), so I can only lose 40% ($200,000). If I win, then I win $200,00, but if I lose, I still have $300,000 left, which is a pretty substantial sum that could be used to raise more capital.
Every year you start again with $500,000? Set aside enough to live on for the year and bet the rest.
Quote from nillionaire:
That scenario is not exactly similar to trading. If I go all in and the die comes up six then I WILL lose everything. But in trading if I go all in and the trade goes bad, I can still get out with some/most of my money.
Not if you're long options overnight and the underlying gaps severely against you. Then your position could become worthless before you have a chance to exit it.
---------------------------------------------------------------------------------Quote from Josef K:
No, you've misread/misunderstood the rules of the game. I only bet 40% ($200,000), so I can only lose 40% ($200,000). If I win, then I win $200,00, but if I lose, I still have $300,000 left, which is a pretty substantial sum that could be used to raise more capital.
Yes, I understand now. You only lose what you bet if 6 is on the roll.