Category Archives: Risk Management

When a High Reward – Risk Setup Is Actually Just High Risk

Visual charting is plagued by confirmation bias and ambiguous  reward-risk. Traders need more objective ways of identifying setups and calculating reward-risk than visual analysis of charts, which rarely works.

Posted in Risk Management, Trader education | Tagged , , | Leave a comment

Stocks Could Rise For The Next 100 Years

What else do we expect stocks to do other than rise? Stocks indexes are regularly rebalanced to reflect upward drift. Investor may feel the pain of large corrections and bear markets along the way but stocks will rise for the … Continue reading

Posted in Risk Management | Tagged , , , | Leave a comment

Passive Investor High Risk of Large Drawdown

While many enjoy blasting market timing, very few admit passive investors face high risks. In fact, Monte Carlo simulations show that passive investors in S&P 500 face 50% drawdown with 50% chance. For small caps investors this risk increases to … Continue reading

Posted in Risk Management | Tagged , | Leave a comment

Markets Are Algo-Event Driven

Two days ago, equity markets worldwide were spooked by Italian political turmoil and possibility of a euroskeptic government that will drive Italy out of euro. The S&P 500 fell 1.2%. Next day, according to financial media, the market rallied 1.3% … Continue reading

Posted in Risk Management, Trader education | Tagged , , , , , , | Leave a comment

Financial Media and Trading Gurus Provide an Edge

The edge the financial media and trading gurus provide comes in the form of dumb money needed for systematic and skilled traders to realize alpha.

Posted in Risk Management | Tagged , , , , | Leave a comment

To Gamble or Not to Gamble?

Below are the results and my conclusions from a problem I posed in Twitter yesterday about gambling.

Posted in Risk Management, Trader education | Tagged , , , , | Leave a comment