Posts Tagged ‘poker players’

# How to Avoid Risk of Ruin in Trading

Here’s a few excerpts from an eye-opening article on the risk of ruin by Brett Steenbarger:

### How to Avoid Risk of Ruin in Trading.

Here’s a nice calculator of risk of ruin for poker players that easily adapts to trading. Risk of ruin represents the odds of losing all of your gambling (or trading) stake…

To adapt the calculator for our needs, instead of estimating win rate and and standard deviation per hour, we will make those daily estimates. So the win rate would represent average profit per day, and the standard deviation would represent a measure of the variability of daily returns.

Let’s say that your account total (bankroll) is \$100,000. You are willing to risk 2% of your money in a single day, and 2/3 of your days will fall between losing and making 1% on your capital. You have a modest positive edge that will earn you 10% on your money in a year, which would be \$40 per day on average (\$40 x 250 trading days = \$10,000).

Your risk of ruin in that situation--the risk of losing all your capital--is only .03%….

The lesson to be learned is that risk of ruin jumps astronomically when one’s edge is eroded and when one’s variability of returns expand. This is why it’s imperative for serious traders to cut their risk (reduce the variability of returns) when they sense that they’ve lost their feel for markets. It’s also why it’s imperative for serious traders to risk manage their day to day trading, so that they cap their daily P/L swings relative to the edge they possess.

And the frustrated trader who overtrades when he loses his edge? Risk of ruin, the calculator tells us, jumps to 100%.

### Phil's Favorites

#### Tell Me a Story

Tell Me a Story

“A man’s reach should exceed his grasp, or what’s a heaven for?”

— Robert Browning

Entrepreneur is a synonym for salesperson, and salesperson is the pedestrian term for storyteller. Pro tip: No startup makes sense. We (entrepreneurs) are all impostors who must deploy a fiction (i.e. story) that captures imaginations and capital to pull the future forward and turn rhyme into reason. No business I have started, at the m...

more from Ilene

### Biotech/COVID-19

#### Long COVID: For the 1 in 10 patients who become long-haulers, COVID-19 has lasting effects

Long COVID: For the 1 in 10 patients who become long-haulers, COVID-19 has lasting effects

Long COVID appears to affect about one in 10 people who have recovered from a COVID-19 infection. (Shutterstock)

Even as the unpredictable rise and fall of COVID-19 infections continues at home and around the world, a new and ugly pandemic-related problem is emerging.

We know it generically as “...

more from Biotech/COVID-19

### Zero Hedge

#### Renting Robots For Less Than Minimum Wage Is A Boon For Companies

Courtesy of ZeroHedge View original post here.

Automation has rapidly expanded in businesses of all sizes to cope with rising wages and labor shortages. Robotics help firms streamline otherwise inefficient tasks and slash labor costs amid an inflationary environment.

Orders for robotic machinery have jumped for automotive, agricultural, construction, electronics, food processing, and warehousing companies. The benefits of employing a robot over a human are now being realized for small and medium-sized companies.

Jose Figueroa, wh...

more from Tyler

### Chart School

#### Bitcoin Swings Down to Support

Come on! Seriously do you think a 400% rally for Bitcoin was going to be given to the public easily. Without any pain! Come on muppets!

The uniformed (public) buy when price is rising or breaking new highs, the informed buy when price is falling or breaking lows.

The informed have to do it this way as they are large volume players and the only way they can buy large volume is to create chaos. The chaos brings to the market the weak holders and a forced sell. Price is moved to where the volume can be accumulated, in a bull trend that is down to critical support.

Of course if price is in a true bull market the 'chaos' created should not break critical long term trend signals, the short and intermediate term signals are fair game. The next fe...

more from Chart School

### ValueWalk

#### Elm Ridge 4Q21 Commentary: The Punch You Don't See

By Jacob Wolinsky. Originally published at ValueWalk.

Elm Ridge commentary for the fourth quarter ended December 31, 2021, titled, “The Punch You Don’t See.”

Q4 2021 hedge fund letters, conferences and more

“Graham and Dodd investors are people who place a very high value on having the last laugh. In exchange for the privilege they have missed out on a lot of laughs in between.” – Michael Lewis

“It’s the punch you don’t see coming that knocks ...

more from ValueWalk

### Kimble Charting Solutions

#### Nasdaq Weakness Has Bears Circling Tech Stocks!

Courtesy of Chris Kimble

One theme over the past several months has been tech stock’s under-performance. And 2022 seems to be amplifying this theme as we kick off the new year.

Today’s chart focus is on the ratio of the Nasdaq Composite to the S&P 500 Index. We have shared this ratio a few times recently as the price pattern has become a concern.

As you can see in the chart, there’s a potential that the ratio double topped last year at the 2000 highs. And weakness this month has it attempting to break dual support at...

more from Kimble C.S.

### Politics

#### What Supreme Court's block of vaccine mandate for large businesses will mean for public health: 4 questions answered

What Supreme Court’s block of vaccine mandate for large businesses will mean for public health: 4 questions answered

New York City’s vaccine mandates are unaffected by the court ruling. AP Photo/Mary Altaffer

Courtesy of Debbie Kaminer, Baruch College, CUNY

The U.S. Supreme Court on Jan. 13, 2022, blocke...

more from Politics

### Digital Currencies

#### The metaverse is money and crypto is king - why you'll be on a blockchain when you're hopping

The metaverse is money and crypto is king – why you’ll be on a blockchain when you’re virtual-world hopping

In the metaverse, your avatar, the clothes it wears and the things it carries belong to you thanks to blockchain. Duncan Rawlinson - Duncan.co/Flickr, CC BY-NC

Courtesy of Rabindra Ratan, Michigan State University and Dar Meshi, Michigan State University ...

more from Bitcoin

### Promotions

#### Phil's Interview on Options Trading with TD Bank

TD Bank's host Bryan Rogers interviewed Phil on June 10 as part of TD's Options Education Month. If you missed the program, be sure to watch the video below. It should be required viewing for anyone trading or thinking about trading using options.

Watch here:

Screenshots of TD's slides illustrating Phil's examples:

&n...

more from Promotions

### Mapping The Market

#### Suez Canal: Critical Waterway Comes to a Halt

Suez Canal: Critical Waterway Comes to a Halt

Courtesy of Marcus Lu, Visual Capitalist

The Suez Canal: A Critical Waterway Comes to a Halt

On March 23, 2021, a massive ship named Ever Given became lodged in the Suez Canal, completely blocking traffic in both directions. According to the Suez Canal Authority, the 1,312 foot long (400 m) container ship ran aground during a sandstorm that caused low visibility, impacting the ship’s navigation. The vessel is owned by Taiwanese shipping firm, Evergreen Marine.

With over 2...

more from M.T.M.

#### Adaptive Fibonacci Price Modeling System Suggests Market Peak May Be Near

Our Adaptive Fibonacci Price Modeling system is suggesting a moderate price peak may be already setting up in the NASDAQ while the Dow Jones, S&P500, and Transportation Index continue to rally beyond the projected Fibonacci Price Expansion Levels.  This indicates that capital may be shifting away from the already lofty Technology sector and into Basic Materials, Financials, Energy, Consumer Staples, Utilities, as well as other sectors.

This type of a structural market shift indicates a move away from speculation and towards Blue Chip returns. It suggests traders and investors are expecting the US consumer to come back strong (or at least hold up the market at...

### Lee's Free Thinking

#### Texas, Florida, Arizona, Georgia - The Branch COVIDIANS Are Still Burning Down the House

Texas, Florida, Arizona, Georgia – The Branch COVIDIANS Are Still Burning Down the House

The numbers of new cases in some of the hardest hit COVID19 states have started to plateau, or even decline, over the past few days. A few pundits have noted it and concluded that it was a hopeful sign.

Is it real or is something else going on? Like a restriction in the numbers of tests, or simply the inability to test enough, or are some people simply giving up on getting tested? Because as we all know from our dear leader, the less testing, the less...

more from Lee

### Insider Scoop

#### Economic Data Scheduled For Friday

Courtesy of Benzinga

• Data on nonfarm payrolls and unemployment rate for March will be released at 8:30 a.m. ET.
• US Services Purchasing Managers' Index for March is scheduled for release at 9:45 a.m. ET.
• The ISM's non-manufacturing index for March will be released at 10:00 a.m. ET.
• The Baker Hughes North American rig count report for the latest week is scheduled for release at 1:00 p.m. ET.
...

http://www.insidercow.com/ more from Insider

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...