Is it possible to reduce risk to zero?

Discussion in 'Strategy Building' started by Norm, Jul 25, 2006.

  1. Define Risk.
    #51     Sep 25, 2006
  2. Yes it's possible... but who wants to be dead?
    #52     Sep 25, 2006
  3. There used to be more no risk trades. Too many computers watching every tick of every stock . No slow hands. None.

    They are still there but don't scale well at all.

    #53     Sep 26, 2006
  4. OK, say you invest in T-bills. One year later, you've made a 5% return. Congratulations.

    The government taxes away 30% of your 'profit' (Even more at the higher brackets, of course), leaving you with a 3.5% 'gain'.
    Over that year, the CPI rises 4.25%

    I really can't understand why most people consider that a 'gain'.
    #54     Sep 27, 2006
  5. As for the definition of no risk, does that mean that there is no drawback in your position or the end result will always be profit? I've managed to create a scripted system that yields backtesting results of approximately 90 percent accuracy. A success rate of 100% would be great but the factors that influence the direction of the market extend beyond just the realm of technical analysis. Fundamental factors for instance can always sway the market in an unpredictable direction.

    I see where you are coming from in saying that you should take small profits to ensure the highest rate of profitability. I have created systems to test this theory and all of my results have indicated that it is not an effective way to trade.

    In summary, I hold risk to be a given when it comes to trading. Without somebody else having risk it is virtually impossible for anyone else to have a profit in day trading.
    #55     Sep 27, 2006
  6. cdowis


    No problemo. You place your stop at your entry point.

    ......oops, commissions, slippage.

    No, I don't think so.
    #56     Sep 28, 2006
  7. Sarcasm noted cdowis. You have me misunderstood - in part due to my lack of clarity - so allow me to mend that. I'm not saying that placing equally sized stop losses and profit targets IS my strategy. I am saying that it is an important PART of my strategy for managing the trade. For multiple contracts, the strategy is very different.

    The rate of success the system has is more than high enough to cover the commission costs. Slippage is accounted for because I do not consider the trade a success unless the price goes above or below the profit target by atleast one tick for long and short positions, respectively. I merely wanted to state that after A LOT of work, this is the highest success rate I could obtain and I wanted to state a part of how I did it. In no way have I claimed this system to be 100% effective. As I have said before, risk will always will be there in some form or another.

    No matter how good your system is you will lose suffer some losing trades in the world of daytrading. Using proper money management and a strategy that yields mostly profitables trades, it is possible to consistently end up with profit at the end of a relatively predetermined time interval. In that sense, risk can be reduced not to zero, but to a very comfortable level that utlimately results in sizeable profits - that is something I will stand by.
    #57     Sep 28, 2006
  8. contango situations still exist and there probably the last true risk free profits avaliable out there
    #58     Sep 29, 2006