risk--- now a bad word??

Quote from Thunderdog:

I think that risk is something to be managed and minimized, rather than glamorized and aggrandized. But, hey, whatever turns your crank.

I think that the people who glorify those who have taken incredible risks to succeed are falling prey to the so-called survivorship bias. The traders I most admire are the ones who have achieved high returns relative to risk rather than merely the highest returns. They may not be the richest guys in the trading world, but they are the most stable. They're more likely to be there tomorrow. And that's what I want -- to be there tomorrow. I'll leave the roller coaster rides to the adrenaline junkies. That's just a personal choice. I think the best traders are risk averse. Those who look for risk probably find more than they bargained for.
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thank you for the cogent and non personal attack reply.

stability can be gained via diversification, not simply by avoiding risk. yes, i agree, it is personal choice on how to approach the markets. however, the fact remains, there is no other way to earn outsized returns other than taking risk. ( ofcourse i am speaking of us mere mortals, not those with access to <i> information</i>)

surfer
 
Quote from marketsurfer:

the retail trading community has been trained not to embrace risk but rather avoid it to preserve their capital while enriching the market infrastructure at the same time. allow me to explain-- frequent trading which results from tight fixed stops increases the brokers bottom line, not the traders while giving the illusion of preservation of capital. its a slow grind down for many who follow the supposed wisdom in trading books/courses--no they will not blow up, but niether will they make enough to make it worth the effort. managing risk does not mean cutting your losses at all times, but rather managing the inevitable losses based on your market analysis. taking risk is the only way to succeed in the trading game. if you avoid losses at all costs, why not just get a job??

surfer [/B]
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come on surfer, nobody's talking about avoiding losses at all costs here... trading is about risk, and how one manages risk, losses etc, whats new?... look VN is a great guy, great academically, thought-provoking, got great ideas, has been thru a lot, taken his share of blame humiliation etc, kudos for the comeback cause it can't be easy etc, granted!... is that what you wanted to hear?... now think about magnitude for a sec... a 28% DD, i mean THAT's sthg worth analysing seriously so it doesn't reoccur too often, don't you agree? it wasn't caused by slippage don't u think? therefore what mix of attitude (denial) and over-leverage may have caused that? i would very much like to know...
 
with a huge drawdown like that i assume your friend vic has added all the way down and his ego got in the way; maybe u can illuminate us since u know him so well, innit.

by the way takin' risks might well be all a matter of perception...people might consider extremely risky to short biotech the day after they lose half of their value, others might not think is the case; same for buyin' the highs on 10%+gappers at the open. personally i think it is more risky and has much less reward takin' leveraged pos overnite on futs just cuz u feel a top or a bottom is in, and infact, am sure many would agree that the heat u took on your trades speaks volumes about your perception of risk and real r/r.
 
This questions is at the crux of all good trading.

A system with a good risk/reward ratio is destined to succeed, one with a poor or average ratio will most certainly fail.

Risk is the one thing that (to a degree) you can quantify, control and manage, so not only is it not a bad word, if you start at the end (managing risk) when putting together your trading system as compared to where most traders start (looking for a good entry system, ie, "making money"), you will already be light years ahead of the pack.

Example:

If you lose:
2 pts (or 20 or 200) 20% of the time
1 pt (etc) 20% of the time

but make:
2 pts (etc.) 40% of the time
5 pts (etc.) 20% of the time

Your Wins will effectively be twice as much as your losses, therefore, all other things being equal, your system will succeed.

Later,

Jimmy
 

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Quote from nononsense:

Many guys NEED to lose for a single guy to make some decent money.

Does somebody have a BETTER answer?
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That's a "good" answer NN, but I don't belive the markets are manipulated like that (but from what I hear the FX market seems to be).

So fine, that is a correct answer.

But it is also correct to say that majority of traders lose because they don't have the discipline to implement their trading methodology in a consistent and dispassionate fashion.

Later,

Jimmy
 
the amount of risk you take on any position is directly proportional to your ability to read/anticipate/takeaction to what the market does after you've taken said position.

the market follows sequences...if you can read the sequences, you can also read the blockers to continuation of the sequence. when a blocker appears, you take an action that is different than the action that you take when the sequence coasts along.

think about this rationally folks.


put simply: hold an asset that is appreciating in value and you hold no risk.

once the asset ceases to appreciate you have begun to see definite and real risk.
 
Quote from Dantheman:

the amount of risk you take on any position is directly proportional to your ability to read/anticipate/takeaction to what the market does after you've taken said position.

the market follows sequences...if you can read the sequences, you can also read the blockers to continuation of the sequence. when a blocker appears, you take an action that is different than the action that you take when the sequence coasts along.

think about this rationally folks.


put simply: hold an asset that is appreciating in value and you hold no risk.

once the asset ceases to appreciate you have begun to see definite and real risk.
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... and here you have it, the hokey grail

sorry, your reply is simplistic and grade school level at best ... do you actually trade money?
 
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