Which % return is true?

Quote from bdixon619:

Sweet. So, are you gonna let the trader burn the entire $25,000 for the chance to make $5,000?
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Why would anyone want to "burn" anything...these are all serious professionals? If I see something like that about to happen, we have a very serious discussion.

Don:confused:
 
Quote from darkhorse:

Hmm, the pertinent question then appears to be, how reliable is that risk estimate?

When you say the trader is risking 25K to make 5K, are you talking about a loss cutoff point for the week, potential risk based on where stops are placed, or the potential for catastrophic loss in light of a seismic event?

Fat tails can be your best friend or your worst enemy... using $1,000,000 in margin yet *only* incurring 25 grand worth of real world risk seems a little off kilter... floor traders get tagged for six figure down days now and then, why would the prop trader profile be so much different?
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Never "margin" ..."use of capital" big difference...when using $1mil for opening only orders, for example...you need the $1Mil, but you certainly aren't risking that much...since half of your orders "Cannot" be filled (only one side can)...and most of the orders "Won't" be filled....yet the strategy can provide a good income by "using" capital properly....

And, yes, unless traders violate rules, they are limited to the original cash deposit....that's part fo the risk that we take.

Each trader should (and most do) run their trading as a "business" ...much like any other business...no one should over-extend themselves....

All the best..

Don
 
Quote from Don Bright:

Why would anyone want to "burn" anything...these are all serious professionals? If I see something like that about to happen, we have a very serious discussion.

Don:confused:
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Good for you Don, glad you're not throwing it around.
 
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