Once again assume much? You have no idea how much I lever or effective my edge is or the varience of my pnl. But got a question, define risk. I think I posted my thoughts of it on a topic recently. Believe I got no response so I take it (assuming, maybe incorrectly) no one agreed with it or thought much of it.
There’s two ways to define risk. It can represent total capital loss or it can represent the probability of hitting a goal.
Thanks for this. The CFA (Chartered Financial Analyst) curriculum could be of interest, although it covers accounting in more detail than most traders need. What about the topics of derivatives -- futures and options?
Based on your post, and out of curiosity, I did a search on that document to see how many times the root word 'predict' appeared, and in what context.
The CFA is great for those seeking a career in the field, but that's a 3-year commitment. This is meant to be a couple of weeks of readings to have a foundational grasp of market concepts. I may do a follow up with more advanced equity and macro trading items. I will leave a derivatives primer to @destriero / @Same Lazy Element / @newwurldmn / @taowave and others who are domain experts. Maybe @globalarbtrader or other systematic traders can put something together a primer for systematic/HFT style trading.
CFa is a three year commitment but it’s really a few weeks of reading a like 3 months of practice exams. I advised my cousin against doing it and she did it anyway. It helped her move from the mid office to the front office and now she’s a PM at CALPERS. (So I gave her pretty crappy advice)
Expand a little please. Total capital loss and not just partial is a form of risk? The probability of hitting a goal is another form of risk?
Total capital loss is the risk that you lose your entire investment (or more if levered). The probability of hitting a goal is based upon the variation in prices. In the textbook I linked to, they review the types of risks in greater detail including how to measure them: