Prudent Risk Management Is The Only True Edge In TRADING

Is Prudent Risk Management the only true edge in trading?

  • Yes

    Votes: 53 29.9%

  • No

    Votes: 124 70.1%
  • Total voters
    177
tommo said:
No you won't. How will you make money at 'evens odds'?? Go and do it then show me the results.

Risk 1 to make 1 you win about 50% of the time.

Risk 1 to make 2 you win about 25% of the time and so on.

Win rate and risk reward are linked in a zero edge scenario.

If you risk 1 to make 5 flipping a coin (or another no edge method) you will win about 1 trade in 5 (NOT 50:50) and break even. Then add in brokerage and slippage and you are down.

Trust me I have run thousands and thousands of backtests. It doesn't work.
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You gave example of coin tossing at 5:1, which is overall 50/50 outcome regardless.
 
tommo said:
id urge you to focus your efforts into finding replicable patterns that exploit inefficiencies in market pricing
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Exactly backwards. New traders should learn to control risk first before trying to discern patterns etc.
 
tommo said:
No you won't. How will you make money at 'evens odds'?? Go and do it then show me the results.
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Flip 1 Loser -100

Flip 2 loser -100

Flip 3 loser -100

Flip 4 winner +500

Net win 200 minus commissions

and thats a 25% win percentage
 
without risk management black swans or 'off days'.. can lead to set backs. Even with extremely high W:L ratio, if you don't use objective risk management, you will be taken out of the game. The trade was in profit, instead of scalping it.. just left it alone.

So wins: 66 losses: 1
nostopsystems.png
 
romik said:
You gave example of coin tossing at 5:1, which is overall 50/50 outcome regardless.
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That's like saying 'winning the lottery is a 50/50 outcome you either win or lose'.

You saying your odds of winning lottery is 50:50?

Look, I'm trying to help you guys but you will believe what you want. Unfortunately it's ignoring basic mathematics. Best of luck to you
 
Buy1Sell2 said:
Flip 1 Loser -100

Flip 2 loser -100

Flip 3 loser -100

Flip 4 winner +500

Net win 200 minus commissions

and thats a 25% win percentage
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And what about when flip 5,6,7 and 8 are also -100's? You will not have a 25% win rate risking 1 to make 5 without an edge
 
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