What is the Real Risk of Trading - Psychology and Money Management | futures io social day trading
futures io futures trading


What is the Real Risk of Trading
Updated: Views / Replies:1,895 / 23
Created: by rahulgopi Attachments:0

Welcome to futures io.

(If you already have an account, login at the top of the page)

futures io is the largest futures trading community on the planet, with over 90,000 members. At futures io, our goal has always been and always will be to create a friendly, positive, forward-thinking community where members can openly share and discuss everything the world of trading has to offer. The community is one of the friendliest you will find on any subject, with members going out of their way to help others. Some of the primary differences between futures io and other trading sites revolve around the standards of our community. Those standards include a code of conduct for our members, as well as extremely high standards that govern which partners we do business with, and which products or services we recommend to our members.

At futures io, our focus is on quality education. No hype, gimmicks, or secret sauce. The truth is: trading is hard. To succeed, you need to surround yourself with the right support system, educational content, and trading mentors Ė all of which you can find on futures io, utilizing our social trading environment.

With futures io, you can find honest trading reviews on brokers, trading rooms, indicator packages, trading strategies, and much more. Our trading review process is highly moderated to ensure that only genuine users are allowed, so you donít need to worry about fake reviews.

We are fundamentally different than most other trading sites:
  • We are here to help. Just let us know what you need.
  • We work extremely hard to keep things positive in our community.
  • We do not tolerate rude behavior, trolling, or vendors advertising in posts.
  • We firmly believe in and encourage sharing. The holy grail is within you, we can help you find it.
  • We expect our members to participate and become a part of the community. Help yourself by helping others.

You'll need to register in order to view the content of the threads and start contributing to our community.  It's free and simple.

-- Big Mike, Site Administrator

Reply
 
Thread Tools Search this Thread
 

What is the Real Risk of Trading

  #1 (permalink)
Elite Member
milpitas, ca, usa
 
Futures Experience: Intermediate
Platform: Tradestation
Broker/Data: Tradestation, Ameritrade
Favorite Futures: ES, Gold, 10 Yr
 
rahulgopi's Avatar
 
Posts: 1,583 since Feb 2014
Thanks: 1,144 given, 3,525 received

What is the Real Risk of Trading

I realized that a lot of our conversation around Risk and Loss is not conducive for an optimal mindset for trading. As a matter of fact, the concept of risk and loss as we see in other life situations doesn't apply for trading. Understanding this will help us see the real opportunity in "Risk and Loss" while trading.

Trading is based on probability. Any given trade has a probability to Win BIG or Loose Small. Loosing small is a mandatory requirement for Winning Big and letting the probability to work in the long run.

As you can see any system with a positive expectancy will produce a profit in the long run Provided we take small looses on the way. It is how probability works.

In conclusion, If you are using a system with positive expectancy and have the discipline to follow it, there is no Risk in trading, there is only Opportunity to either Win Big or Loose small in any trade for the greater good of turning a profit in the long run.


Last edited by rahulgopi; February 20th, 2015 at 06:46 PM.
Reply With Quote
The following 3 users say Thank You to rahulgopi for this post:
 
  #2 (permalink)
Quick Summary
Quick Summary Post

Quick Summary is created and edited by users like you... Add FAQ's, Links and other Relevant Information by clicking the edit button in the lower right hand corner of this message.

 
  #3 (permalink)
Elite Member
SF Bay Area + CA/US
 
Futures Experience: None
Platform: Tradestation, Ninja
Favorite Futures: NQ ES & Equities
 
paps's Avatar
 
Posts: 1,512 since Oct 2011
Thanks: 1,972 given, 1,279 received
Forum Reputation: Legendary


@rahulgopi my man.

You seem to hit it on the nail.
the trick is always to loose small.

Care to shed some light on how should a trader do it Provided he..she already has an edge or post expectancy.

Stops.. Etc?

Cheers
s

Reply With Quote
The following user says Thank You to paps for this post:
 
  #4 (permalink)
Elite Member
Prince George BC Canada
 
Futures Experience: Advanced
Platform: IBs TWS
Broker/Data: IB
Favorite Futures: Stocks
 
deaddog's Avatar
 
Posts: 591 since May 2013
Thanks: 97 given, 643 received


rahulgopi View Post

In conclusion, If you are using a system with positive expectancy and have the discipline to follow it, there is no Risk in trading, there is only Opportunity to either Win Big or Loose small in any trade for the greater good of turning a profit in the long run.

Exactly!!!

As traders the only thing we have control over is when we enter and exit the trades we make.

It is hard to find the Truth when you start your search with a preconceived notion of what the Truth will be.
Reply With Quote
The following 3 users say Thank You to deaddog for this post:
 
  #5 (permalink)
Trading Apprentice
 
Futures Experience: Intermediate
Platform: Ninjatrader
Favorite Futures: CL
 
algorithmic's Avatar
 
Posts: 29 since Feb 2015
Thanks: 13 given, 19 received

real risk of trading is beyond profit or loss . you loose your time ,your best times that can be spend wit family ,friends, etc.. you glaze your eyes over charts and you will have a virtual life. you lose at least 5 years of your age in order to find a trading system. ( i can not believe anyone can find a system less than 4-5 years of trying hard)
but speaking in terms of real risk ,there is no guarantee about the risk , even if you risk 1% of your equity ,there would be the possibility of 100 times of loss in a row.every thing is possible , so modeling risk in mathematical manner is just making yourself fool. Nichols Nasim Taleb (PHD in statistics)says : even in the best financial engineering departments in universities,there would be nothing more than wrong ideas and pseudo science .
some years ago two Nobel Prize winners of Economy science ,started a investment fund in USA. they implemented all modern theories and mathematical aspects of controlling risk .but their fund fell in the market .as a human we can not measure "real risk" of anything.trading is not an exception

Reply With Quote
The following 2 users say Thank You to algorithmic for this post:
 
  #6 (permalink)
Elite Member
Luxembourg, Luxembourg
 
Futures Experience: Advanced
Platform: TWS
Broker/Data: Interactive Brokers
Favorite Futures: Stocks
 
Posts: 491 since May 2012
Thanks: 1,641 given, 1,126 received


algorithmic View Post
real risk of trading is beyond profit or loss . you loose your time ,your best times that can be spend wit family ,friends, etc.. you glaze your eyes over charts and you will have a virtual life. you lose at least 5 years of your age in order to find a trading system. ( i can not believe anyone can find a system less than 4-5 years of trying hard)
but speaking in terms of real risk ,there is no guarantee about the risk , even if you risk 1% of your equity ,there would be the possibility of 100 times of loss in a row.every thing is possible , so modeling risk in mathematical manner is just making yourself fool. Nichols Nasim Taleb (PHD in statistics)says : even in the best financial engineering departments in universities,there would be nothing more than wrong ideas and pseudo science .
some years ago two Nobel Prize winners of Economy science ,started a investment fund in USA. they implemented all modern theories and mathematical aspects of controlling risk .but their fund fell in the market .as a human we can not measure "real risk" of anything.trading is not an exception

Taleb is right in that a lot of the investment / portfolio and risk management taught at university is a pseudo-science. It is all based on trying to fit into the current accepted efficient market model which implies that all of us on this forum are wasting our time since we can't beat the market anyway.

The two Nobel Prize winners (Myron Scholes and Robert Merton) did not start LTCM, it was started by John Meriwether who was a top bond trader at Salomon Brothers. If I recall correctly they were involved as partners, but it did not sound like they were that involved in the day-to-day trading of the fund. LTCM traded statiscal arbitrage strategies and these strategies are based on correlation between instruments staying roughly the same. If these correlation stay the same, you can model how prices should behave. This worked extremely well for LTCM until Russia defaulted on its debt and several of the correlations did not hold. LTCM could have survived, but they martingaled onto their existing losers and it just snowballed out of control. It was mostly ego that caused those losses. The book "When Genius Failed" goes into a lot more detail than I can here.

Regarding the "measuring of real risk", most strategies that use stop-losses and concentration limits are quite good at limiting risk. They don't really try and "measure" risk, but those strategies know how much an account can lose if all stops are hit and executed within defined slippage parameters. Thus, it is easier to control risk, but measuring risk with VAR tends to be a pointless exercise.

On another note, your entire account is always at risk - your broker can declare bankruptcy at any time...

Reply With Quote
The following 2 users say Thank You to grausch for this post:
 
  #7 (permalink)
Trading Apprentice
 
Futures Experience: Intermediate
Platform: Ninjatrader
Favorite Futures: CL
 
algorithmic's Avatar
 
Posts: 29 since Feb 2015
Thanks: 13 given, 19 received

i agree with you,they did not consider Russia as a major risk in their portfolio.the fact is that we as human kind are UNABLE to measure risks .with stop loss we just limit our risks and at the other hand we "increase" opportunity factor of risking.it's possible to have 100 losing trades in a row.even if you risk 1% of your equity.BTW i think "real risk" of trading is somehow much more than what we consider .it's been always my own question that if reward (money) of trading is greater than it's hidden risk...

Reply With Quote
The following user says Thank You to algorithmic for this post:
 
  #8 (permalink)
Elite Member
Prince George BC Canada
 
Futures Experience: Advanced
Platform: IBs TWS
Broker/Data: IB
Favorite Futures: Stocks
 
deaddog's Avatar
 
Posts: 591 since May 2013
Thanks: 97 given, 643 received


algorithmic View Post
even if you risk 1% of your equity ,there would be the possibility of 100 times of loss in a row.every thing is possible , so modeling risk in mathematical manner is just making yourself fool.

If you risk 1% of your capital your risk will be reduced as your capital is depleted. After 100 losses you would still have about 1/3 of your capital remaining.

After 10 losses in a row I would take a long hard look at my trading strategy, and more than likely reduce my risk per trade until I determined the problem.

My record is 23 losses in a row. The problem was the trader not the strategy.

It is hard to find the Truth when you start your search with a preconceived notion of what the Truth will be.
Reply With Quote
The following 4 users say Thank You to deaddog for this post:
 
  #9 (permalink)
Trading Apprentice
 
Futures Experience: Intermediate
Platform: Ninjatrader
Favorite Futures: CL
 
algorithmic's Avatar
 
Posts: 29 since Feb 2015
Thanks: 13 given, 19 received

as long as your equity is reducing , your risk will be INCREASED.if you 've a modest trading account of 10k and each time you risk only 100$,whenever your equity is 8k,then 100$ is not 1% of your equity .
as you pointed, draw downs have additional pressure on mind , so they are additional hidden risk too

Reply With Quote
The following user says Thank You to algorithmic for this post:
 
  #10 (permalink)
Elite Member
milpitas, ca, usa
 
Futures Experience: Intermediate
Platform: Tradestation
Broker/Data: Tradestation, Ameritrade
Favorite Futures: ES, Gold, 10 Yr
 
rahulgopi's Avatar
 
Posts: 1,583 since Feb 2014
Thanks: 1,144 given, 3,525 received



algorithmic View Post
as long as your equity is reducing , your risk will be INCREASED.if you 've a modest trading account of 10k and each time you risk only 100$,whenever your equity is 8k,then 100$ is not 1% of your equity .
as you pointed, draw downs have additional pressure on mind , so they are additional hidden risk too

The key is to have a system with positive expectancy and have the discipline to follow it. IS there a probability to get all loosing trades in a row and washout your account? probable but chances are very less. We are emotional beings, once we see a number of losers, the first intention is to tweak the system or to look for a new one. Traders who succeed are the ones who have confidence in their method, have the gut to follow it, not to be fearful about handful of losses as they know the probability will work in the long run.

A casino is a good example of a system with positive expectancy that work in the long run. It is the law of big numbers and probability. Most games have a very slight edge for the casino but it will work in favor of casino with a large number of plays.

Reply With Quote
The following 2 users say Thank You to rahulgopi for this post:

Reply



futures io > > > What is the Real Risk of Trading

Thread Tools Search this Thread
Search this Thread:

Advanced Search



Upcoming Webinars and Events (4:30PM ET unless noted)

Linda Bradford Raschke: Reading The Tape

Elite only

Adam Grimes: TBA

Elite only

NinjaTrader: TBA

January

Ran Aroussi: TBA

Elite only
     

Similar Threads
Thread Thread Starter Forum Replies Last Post
Trading REAL MONEY DetroitMoney Stocks and ETFs Trading 131 November 23rd, 2013 06:10 AM
Transitioning from paper-trading to real money trading Tomorrow (CL) reno57540 Commodities Futures Trading 4 October 25th, 2012 02:46 PM
Real Simple Math Puts The Real US Unemployment Rate At 49% Victory Trader News and Current Events 1 August 13th, 2012 07:25 PM


All times are GMT -4. The time now is 10:24 PM.

Copyright © 2017 by futures io, s.a., Av Ricardo J. Alfaro, Century Tower, Panama, +507 833-9432, info@futures.io
All information is for educational use only and is not investment advice.
There is a substantial risk of loss in trading commodity futures, stocks, options and foreign exchange products. Past performance is not indicative of future results.
no new posts
Page generated 2017-12-11 in 0.14 seconds with 19 queries on phoenix via your IP 54.145.16.43