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# Would you ever trade a high probability, high risk method?

Discussion in 'Trading' started by clambill, Oct 13, 2008.

1. ### clambill

I mean let's say if you could be right 80% or more of the time but your risk/reward ratio would be like 4:1. In other words, you'd be risking \$4 to make \$1.

Anybody have an idea how you would manage the trades?

Never.

3. ### empee

i dont get it. So lets say:

80% or 4 out of 5 times you make \$1 = \$4

20% or 1 out of 5 times you lose = \$4

this doesn't have positive expectancy.

4. ### sjfan

Why not? Just trade a 1/4 your account size and keep the rest in cash and thereby deleverage the strategy.

5. ### wave

Figure out how to keep it 1:1 or 1:3 or better.

7. ### Compulsive

Eventually at that rate \$4 =\$1, you will end up negative.
You have 8 winners ina row at \$1 each and two losses at \$4 each = \$0. then you have commission and time....A osing proposition

8. ### sjfan

Ah. I assumed he'd be posting a strategy with positive expectancy - otherwise what's the point of event wondering about this strategy.

9. ### MTE

Sounds like a typical option-premium selling strategy in the form of verticals/iron condors.