How to figure risk to reward (a formula)

[skyQuake]

why do i need to gloat about CTX when i made much more ROE on the other ones as shown in this message thread.

Sure you make awesome ROE, but you do realise a few 'bad' ROE's will wipe you out?

a 70% loss will require a 333% gain just to get back to your original equity level?

You could be 80% accurate with each win twice as great as your loss on average and you'd still go bankrupt.

Eg. start off with $5000

Trade 1: 85% ROE
Trade 2: 85% ROE
Trade 3: -85% ROE
Trade 4: 85% ROE

End result: $4749
Screwed.

 

[beamstas]

You could be 80% accurate with each win twice as great as your loss on average and you'd still go bankrupt.

Eg. start off with $5000

Trade 1: 85% ROE
Trade 2: 85% ROE
Trade 3: -85% ROE
Trade 4: 85% ROE

End result: $4749
Screwed.

Agree with the second part
$5000.00
$9250.00
$17112.50
$2566.88
$4748.71

But im lost on the first part
If you win 80% of the time and you win twice as much as you lose, wouldn't you have positive expectancy?

Example
$500 wins = $250 losses

$500*.80 minus $250*.20 = $350 expected per trade

What did i miss?

 

[clayton4115]

i just sold CSR as its close to support, down 6.50% wow! :

made a nice 105% ROE

thank you very much!

 

[clayton4115]

as i said in my earlier posts, by getting it wrong the ROE is terrible as well,

example

trade date 29/05/2009
stock amp
Sold Price $4.740
Units 210.00
total exposure $995.40
Margin 5.00%
my outlay $49.77
buy date 2-Jun
Price $4.94
profit / loss -$54.00
ROE -108.50%

 

[beamstas]

i just sold CSR as its close to support, down 6.50% wow! :

made a nice 105% ROE

thank you very much!

ROE, ROM or LOL?

 

[clayton4115]

CTX -3.00% as we speak / write / ponder / wonder

 

[clayton4115]

ok these are my shorts for this week, i havent put these as live trades as this week i will be away from my computer alot and wont be able to monitor it

so just for kicks lets see how i go come friday 4pm

current prices and ASX code below

ASX 35.61
WOW 26.20
HSP 4.00

im bearish on the above for the next few days.

 

[nomore4s]

ok these are my shorts for this week, i havent put these as live trades as this week i will be away from my computer alot and wont be able to monitor it

so just for kicks lets see how i go come friday 4pm

current prices and ASX code below

ASX 35.61
WOW 26.20
HSP 4.00

im bearish on the above for the next few days.

*sigh*

You just don't get it do you?

We don't give a rats about your picks, if those stocks end up down @ 4pm Friday what does that prove? Nothing. They could move up 15% but still end up down by 5% on those prices come 4pm Friday - does that make it a good trade? NO but you'll think you're a champ because you picked the direction.

What we are trying to get through to you is - Position sizing & risk management. Where's your position sizing & stoplosses for these trades?

For a FP your lack of ability to understand what we're trying to get across is staggering. Just keep stroking your own ego.

 

[Trembling Hand]

What we are trying to get through to you is - Position sizing & risk management. Where's your position sizing & stoplosses for these trades?

For a FP your lack of ability to understand what we're trying to get across is staggering. Just keep stroking your own ego.

Why are you surprised a FP cannot understand how to trade/invest/basic use of money.

Classic example of a FP's "skill".

 

[clayton4115]

Why are you surprised a FP cannot understand how to trade/invest/basic use of money.

Classic example of a FP's "skill".

what would your comments be if i was a stockbroker?

 

[Trembling Hand]

what would your comments be if i was a stockbroker?

Something like this,

Classic example of why he pushes buttons to move OTHER peoples money around.

 

[Mr J]

I doubt he's a FP anyway. In my experience, this behaviour is typical of 18-21 year olds.

 

[skyQuake]

Agree with the second part
But im lost on the first part
If you win 80% of the time and you win twice as much as you lose, wouldn't you have positive expectancy?

Example
$500 wins = $250 losses

$500*.80 minus $250*.20 = $350 expected per trade

What did i miss?

Correct. Expectanct is positive but that means jack-all.

In your above example, What if your bankroll is $250?
If you lose the first trade, you're dead. If you win the first but lose 2~4, you're dead.

In clayton's example it would seem more to be a total % of capital risked rather than fixed $ risked.

i.e. You can have a roulette system that wins 99%, but if you try double up every time, you're gonna give it all back sooner or later.

I doubt he's a FP anyway. In my experience, this behaviour is typical of 18-21 year olds.

lol sounds about right

 

[clayton4115]

hey, my strategy is called a clayton's strategy, a strategy when your not employing a strategy.

 

[beamstas]

Correct. Expectanct is positive but that means jack-all.

In your above example, What if your bankroll is $250?
If you lose the first trade, you're dead. If you win the first but lose 2~4, you're dead.

In clayton's example it would seem more to be a total % of capital risked rather than fixed $ risked.

i.e. You can have a roulette system that wins 99%, but if you try double up every time, you're gonna give it all back sooner or later.

Oh yeah....
But if you are risking say 1% of account (and not crazy amounts like him), then positive expectancy shouldn't fail you.. right?

 

[skyQuake]

Oh yeah....
But if you are risking say 1% of account (and not crazy amounts like him), then positive expectancy shouldn't fail you.. right?

Then you should be fine
You can probably risk more than 1% of account then if you're doing so well... at least till you become too big for the market

 

[beamstas]

Then you should be fine
You can probably risk more than 1% of account then if you're doing so well... at least till you become too big for the market

Oh im not talking about me just positive expectancy in general!
I don't think i'll ever be too big for the market, even risking 100%

 

[Kez180]

YOU CANT EVEN CALCULATE YOUR RISK IF YOU DONT HAVE A STOP LOSS

You still have a value at risk, the whole amount....

 

[Trembling Hand]

You still have a value at risk, the whole amount....

Actually its even more than that. This is why its just plain silly. Very easy to have a CFD account go negative, very negative.

 

[ojm]

I doubt he's a FP anyway. In my experience, this behaviour is typical of 18-21 year olds.

Hey, don't generalise us younger ones! Most of us on here use risk management. I've learnt lots more than 'cos of you guys. I think Clayton may need to read a book about it.

This forum recommended Adaptive Analysis by Nick Radge, and that changed my perspective on everything.