With Thanksgiving just a couple days away, we’d like to not only encourage a balance in your diet that will leave you feeling healthy and proud, but we’d also encourage a balance between risk and reward in your trading system!
Here’s an example of risk vs reward: If you go to a casino and bet everything you have on red, then you have a 49% chance of doubling your money and a 51% chance of losing everything. The same applies to trading; you can make a lot of money if you’re risking a lot, but then risk of ruin is very high. You need to find a healthy balance between risk and reward.
Let’s say you define ruin as losing 20% of your account and success as making 20% profit. Having a trading system with past performance results lets you calculate your risk of ruin and your chance of success.
Your risk of ruin should be always less than 5%, and your chance of success should be 5-10 times higher. So, if your risk of ruin is 4%, then your chance of success should be 40% or higher.
This is just a little trading system tip to keep in mind over the holiday! We at the Apiary Fund are sure thankful for all of you that make this community so great! Have a happy Thanksgiving, and if you’re traveling, be safe!