How much would you risk on a GOOD trade?

Quote from Swan Noir:

I assume the take away from your sample run is that out of 10,000 "coin tosses" tails came up 13 times in a row only once and 1236 times a single time before alternating to a head. Simple enough if that is the concept. But if that is the case it seems I should be able to add all the numbers -- heads and tails -- and get exactly 10,000. I'm eyeballing it and it seems the sum comes in at fewer than 5,000.

I'm sure I am missing an important yet simple concept. What is it I am missing?
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Yes, you're right. There's an error, most likely with the counting of the 1-run whipsaws between heads and tails... That's what 15 min gets you - close, but not close enough...
 
Quote from blah12345678:

Yes, you're right. There's an error, most likely with the counting of the 1-run whipsaws between heads and tails... That's what 15 min gets you - close, but not close enough...
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Double-checked - no error.

If you multiply the run * total, and then add all of them together, you get the correct number of tosses...

That is, if I have a run of 7, you don't increment the run totals for 1, 2, 3, 4, 5, 6, and 7. You just increment 7.
 
Quote from ammo:

your risk should relate to how long you want to be in business,12 months is 1/12th of your acct per month,if you establish an avg monthly profit, that becomes your new risk per month... humans lie a lot so you can't bet on your ratings of 95% 's,another thing to consider ,if it is that good of a setup, like the bear packer game on monday night, packers giving 8 and over under at 49, the world bet on the pack and the over, if that came thru vegas lost, so they tweaked it( a few bogus penalties) and cleaned up, wall street does the same
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Finally some sensible comment on ET….....

Average monthly profit makes a lot of sense. I also agree with your statement that wall street would “clean up” a good setup. That’s part of the concern that you would have when you find a good setup, it will not last long.. so whatever you are in early that’s where you will mostly make the money..
 
Go it ... thanks.

Quote from blah12345678:

Double-checked - no error.

If you multiply the run * total, and then add all of them together, you get the correct number of tosses...

That is, if I have a run of 7, you don't increment the run totals for 1, 2, 3, 4, 5, 6, and 7. You just increment 7.
More...
 
It depends on the liquidity of the instrument. Assuming liquidity is not an issue, the bet should anywhere from 1/10 to 1/2 of the Kelly Criterion. However there are psychological considerations, if the trader is very active, that might lead to lower bet sizes
 
Depends on how much money u have made so far....if you are up 20-30% for the year, might risk 10%.

See Druckenmiller interview in market wizards
 
High probability trades are a figment of a trader's imagination



But.., for arguments sake - let's say I believed a high probability trade existed... say it 95%... even 99%

I still need to manage the 5% to 1 % probability it'll fail

So what have I gained - not 1 damn thing - it could still fail....

At best - I've only lulled myself into a false sense of some sort of security - that flat out does not exist

Pfffttt

Mkt is uncertain - adapt

or not

RN
 
As long as you don't risk enough to severely damage your account it doesn't matter.
You risk a little; it's safer, but you don't make as much.
You risk a lot; it's not as safe, but you make more.
It all works itself out over time the more trades you make.
 
Redneck said:
High probability trades are a figment of a trader's imagination
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Not true...there have been a number of times when there was almost a no brainer trade.

The following come to mind:

2009, fed announces qe, stocks begin bull market

1994 when Greenspan unexpectedly raised rates, fairly obvious that bonds and stocks would go down heavy.

1992, Soros bet 10% of his fund that sterling would be forced out of the ERM.
 
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