Trading basics - a quick poll

Discussion in 'Strategy Development' started by Cutten, Jul 1, 2008.

How would you allocate your capital between Trade A and Trade B?

  1. I would put more capital into Trade A

    20 vote(s)
  2. I would trade them both with identical amounts of capital

    6 vote(s)
  1. Cutten


    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?
  2. It depends many factors, as trading just A alone would be also highly possible/ desirable (supposing all other factors being the same).
  3. 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.)
  4. u21c3f6


    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.

  5. BSAM


    Hmmm.....No trade has a 90% chance of winning (or losing). This should be understood in "trading basics".
  6. Luckily Jack hasn't got a chance to read your this post Yet! :D
  7. BSAM


    I'm "sure" he could correct me.:D
  8. 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??
  9. Probably very soon! :D
  10. 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.
    #10     Jul 1, 2008