Let's say you have two trading opportunities. Trade A has a 90% chance of winning, and will pay out 5 times your risk. Trade B has a 51% chance of winning, and will pay out 1:1 versus the amount you risk. Would you trade these the same size, or would you put more capital into trade A?
It depends many factors, as trading just A alone would be also highly possible/ desirable (supposing all other factors being the same).
Since I wouldn't take Trade B, I guess it follows that I would trade larger size using Trade A. (Of course, we're assuming fairly specific probabilities and payoffs about future outcomes, which makes the exercise a bit fanciful.)
For me, I would only do trade A. Combining Trade A and Trade B would only reduce risk of loss by 5.1% at the expense of a much higher return. Joe.
Hmmm.....No trade has a 90% chance of winning (or losing). This should be understood in "trading basics".
how often does each occur?? For example, if trade A happens only once per year, and at 90% chance of probability can not be realistically improved, but trade B happens once per day, but at 51% probably has room for improvement, then B would actually be the trade to take....but again the question is how often do these trades come about??
It just occurred to me. I had thought he was claiming "always in and never a loss." In fact, it seems that what he meant was "always in riddles and never at a loss" for words, words and more words.