What it Means to "Create Your Own Casino" and Thrive as an Active Trader: One of the best analogies that applies to your edge and overall success as a trader is to create your own personal casino. What this means is that you need to pinpoint opportunities with positive expected value (where the probabilities and risk-reward work out to produce overall profitability) - and keep taking advantage of the numbers being in your favor over-and-over again. In a casino, they do this with … [Read more...]
How to Properly Track Your Trades to Figure Out What Works
What "Works" Can Vary Drastically From Trader to Trader and Market to Market: When new traders are just getting started, they typically want to be handed a strategy/system that "works". But what works for one trader might not work for another - and what works in one market might not work in another. It's just not that simple. It sounds nice when a trading guru claims they have a magical pattern that can make them (and you) millions of dollars like clockwork. But it's nonsense. Basic … [Read more...]
What is Asymmetric Risk-Reward in Trading and Investing?
What is Asymmetric Risk-Reward - An Imbalance in Potential Loss and Profit: Asymmetric risk-reward is simply when risk is not equal to reward. For example, a trade that offers a $300 potential profit for $100 of risk has an asymmetric risk to reward ratio of 1:3. Generally speaking, a 1:3 ratio is the "sweet spot" for most traders/investors. The reason having a higher potential reward in comparison to risk is so that you don't have to "win" as often on your trades in order to be … [Read more...]
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