No the correct approach is to make smaller bets but more of them. Risk 2% on each of 10 trades instead 20% in one. Neke is making 1000+ trades a year, he doesnt need to bet big to make huge returns.
"If you have an edge you will make money." "You have to be able to deal with big drawdowns if you want to make high returns." Why would you have to deal with big drawdowns if you have an EDGE??? Here's one of many day trading strategies that provides an "edge": Using a 5-min chart, wait for the first 30 minutes to establish intraday support and resistance, then sell the first lower high of the day or buy the first higher low of the day with a stop placed just outside the lower high or higher low. Look at some of the popular day trading stocks Friday and notice how this tactic would play out: AAPL short for a $3/share gain BIDU short for a break-even stopout or a small scalp CAL short for a .45/share gain X long for a .60/share or better gain POT short for a 1.00/share or so gain HIG short for a break-even stopout And this edge still managed to work on a day when the largest move for most stocks was over in the first 30 minutes. I agree that leverage is required to make big bets, but don't ever confuse leverage with an actual EDGE.
What? Maybe he has a smaller edge than you think and needs to lever up to get the type of returns that he's been getting.
Great recipe for LOSING BIG MONEY FAST. An edge doesn't guarantee you squat if you squander it with a series of oversize "bets" and bad decisions.
If you're going to go that route then you better have: 3. Good luck. Positive edge + betting big sounds like the path to riches until you get more consecutive losing trades than you bargained for.
Yes, it is a dangerous path. No doubt about it. A bigger edge makes it less dangerous. But following the Kelly formula, if you have a big edge, its best to bet big in order to increase the account size at the fastest rate. After big losses, one must of course adjust bet size down with the newly shrunken account base, and after big wins, increase bet size.
Russian roulette has great odds, you win 5 out of 6 times. But the downside of losing is it knocks you out of the game. Risking a large % of your account to try to win big is dumb if you plan to do this long term. Capital preservation should always be goal number one.
you sound immature you talk about the edge as something you've been chosen to possess and then quantify it as "bigger" or "smaller". it is not like that you might have an edge during one hour/day/month/year and then it is gone. but you'll never know it until the drawdown becomes painful, whether using kelly formula or anything else. in fact kelly is absolutely irrelevant because it is based on knowing in advance what is going to be your W% and W:L ratio, which is wishful thinking.