Welcome to NexusFi: the best trading community on the planet, with over 150,000 members Sign Up Now for Free
Genuine reviews from real traders, not fake reviews from stealth vendors
Quality education from leading professional traders
We are a friendly, helpful, and positive community
We do not tolerate rude behavior, trolling, or vendors advertising in posts
We are here to help, just let us know what you need
You'll need to register in order to view the content of the threads and start contributing to our community. It's free for basic access, or support us by becoming an Elite Member -- see if you qualify for a discount below.
-- Big Mike, Site Administrator
(If you already have an account, login at the top of the page)
To be honest, I wish I had folks pestering me to be diligent with what I needed to do to have the necessary discipline. The pestering here is kind of joky, yes, but it has a tang of seriousness, because we want to see you succeed. If your asymmetrical post is needed to help you on your path, we are behind you, and we'll do what you asked...Bug you to death to keep you on your path to profitability, or at the very least, DISCIPLINE! McFly! ;-)
One thing about asymmetric returns, and anything else: when you put something in your own words, it will be different from what anyone else may say about it, even if you think you are saying exactly the same thing in exactly the same way. You aren't, and can't.
So just plow ahead with the topic as it is for you, no matter that someone else originally raised the subject for you. It will be good, when delivered as you see it.
Well, he did speak about that quite extensively. From what I gathered, he would pyramid into trades as they moved in his favour while still having his stops fairly wide. If I recall correctly, he really impressed the need to get the maximum out of trades that were working.
-Massive day and volume on Friday
-Price broke below Year-to-date (YTD) +1SD. May be the sign that we are due for a trend correction.
- If price can't break back above that, I will be aiming for the ~2060 support area and the YTD-VWAP.
- Wouldn't it be fun if we got that low?
360 Min:
-Price needs to sustain above Monthly S2 if we want any chance of going higher.
Right around Monthly S2 is Monthly -1SD. If we break above that, it gives us a higher chance of NOT being in a downtrend.
-Market holding above 2100 number
Quick Day Thesis:
-Market could make a nice rally to pare some of Friday's losses
-A long down here is pretty risk-free
Trade Thesis:
-Build long down to 2107 area. If we break below 07, I will most likely flip short.
-Aiming for 25 area.
So, a key aspect of trading is understanding what "asymmetrical returns" are and how to achieve them in your trading.
Asymmetrical returns. Sounds cool, right? Well, that's because it is!
Asymmetrical returns has a billion definitions, but to put it in trader layman's terms: capturing more upside and less of the downside.
"Well, duh Alex. Who doesn't want that?" -You
"Well fellow trader, since it is so simple, what are you waiting for " -Me
What it means to have asymmetrical returns is that you make far more per win that per loss.
@Inletcap describes them as taking a trade because it does not matter the outcome, for in the long-run you are profitable. (paraphrasing, please correct if need )
"tend to agree with itchy, and not just because he's my neighbor. everything happens for a reason even though you may not be able to determine the cause; even random chop. the trick is being able to determine what the effect (if any)will be on your position. e.g., if you are long and the market and it sells off, and you understand what's taking place and/or are expecting it, then it's an opportunity to add, as opposed to an opportunity to panic and get shaken out. this past friday was a perfect example. it was the last trading day of a month that had experienced a linear move higher. odds were in favor of month-end profit taking. even though the market drift was up, it made sense to trade the market from the short side on an intra-day basis. however, if one was long coming into the day, it was also an opportunity to add to the long position, and/or an opportunity to initiate a new long. that was because, the following trading day was the beginning of the new month with very strong seasonality, compounded by the fact that the drift was higher and the short, intermediate, and long term trends were all bullish. while there was money to be made on an intra-day/ counter-trend basis, there was much more money to be made, trading with the trend. in the former case one is limited to how much money they can make, and in the latter case that limit has been removed. one should alsways be looking for the trade that offers them the best opportunity to make the most money. this is what taleb refers to as “Optionality" or the asymmetric upside (preferably unlimited) with correspondingly limited downside (preferably tiny).”"
Long read, but definitely worthwhile. What he is saying is that you should take trades not with the fear of losing, but with the hope of making LOTS of money. Like @tigertrader says here, "one should alsways be looking for the trade that offers them the best opportunity to make the most money."
He also says that when you are confident in your market analysis, you should not look at movement "against" your position as a bad sign, but rather a good time to add. This happened to me today, and allowed me to buy a second lot and make a quick 21 ticks extra. But I will talk more about how this affects me later.
Another quote by him:
"it's not only about time-frames, but it's about trade management, and how traders behave when faced with probabilities. if you offer a subject a sure win and you offer them a lottery that's a little better, they'll take the sure win. on the other hand, if you offer them a sure loss or a lottery that's a little worse but has a chance of recouping their loss, they'll take the lottery (st. petersburg paradox). this is the reason why traders like to take quick profits and play with their loses, instead of the other way around. there are other ways in which profits and losses are not equivalent. one is objective and has to do with non-linearity i.e., it takes a 100% profit to make up a 50% loss, and for many traders, the prospect of a 150% profit does not compensate for the risk or emotional pain of a 50% loss (prospect theory). what's really important is exploiting your winners regardless of the time-frame you're trading. w/o asymmetric returns, you'll be spinning your wheels in either time-frame."
I think this is very important. Re-read the last sentence. Most traders spend so much time trying to figure out the time frame they need to use or the chart type etc. Guess what! None of it matters if you do not manage your trades correctly!!!
I firmly believe that anyone can be profitable with any tools if they have confidence and the ability to achieve asymmetric returns! I am not kidding! I am no different than you all! We are all humans with the ability to think and click buttons on a screen! The difference is how we think and how we click those buttons.
I am thinking about starting a new thread having to do with this idea. I may if I think I have time
Anyways, back to the subject. This is a lot of information and may seem a bit pointless, but I promise, it is not. I would not devote this much time to it if I thought so
So, lets talk about my trade today. Go up and look at the chart. See my trade? Let's go over it.
I create my thesis and decide I want to buy long. Guess what happened? I bought long. I was confident that in the long-term, my wins would outweigh my losers. Why? Because I know that the second I bought that long, that if I lost on it, I would lose a small amount. But man.... If I won....
If we look at the previous day. My largest loss I took was ~24 ticks or so. I was totally fine with that! I don't mind at all! I don't care because I know that over time I will achieve asymmetrical returns. I always take my trades aiming for the big wins.
Okay ladies and gentlemen... This topic is far too important to try and fit in one post. It really is. Do your research and re-read this if you'd like. This is soooooo important. Maybe @Big Mike would give his word on such a subject.
I will try to sum this all up with one quote from Tiger (paraphrased):
"People worry too much on maximizing chances of profitable trades, and far too little on maximizing profitable trades."
Ride your winners. You just beat the markets, why not let it pay you what you deserve?
there are many traders who are engaged in the pursuit of trading profits, who by their own lack of skill are really gambling; they are knowingly trading without an identifiable edge. like gamblers, their utility function is not necessarily based on growing …
)