Are YOU afraid of the BLACK SWAN?

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xtremeforex
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Are YOU afraid of the BLACK SWAN?

Postby xtremeforex » Sat Dec 29, 2012 3:23 am

The Black Swan is an UNPREDICTABLE event when the market makes a sudden enormously drastic move in a direction unfavourable to your positions. The chances of blowing your account are high, without a stop-loss. People with stop-losses may survive, but usually all of their accumulated profits are wiped out.

While this may seem ok at first for stop-loss users because they didn't blow up. The frustration begins every-time they have accumulated profits and just at that time another black-swan occurs and the process starts all over again (major waste of time).

I don't use a stop-loss (but I do use a way to calculate loss) but I have avoided the devastation of the black swan when they have happened.

There are people out there that would say this:

"people who don't use a stop loss will accumulate profits but eventually they will blow up and lose everything when the market makes a sudden move the wrong way.."

I disagree. You can only lose what you leave in the market or account.

#1. Pull out profits on an on-going basis. How much you pull out and how often, depends on your strategy's ROI and speed of attaining.

#2. Stop the reinvesting ALL profit to make larger gains (compounding). Your primary goal should be to have your initial deposit withdrawed first. Your risk goes toward zero the more you pull out toward your initial deposit. Making your Risk curve exponentially decrease is more important than your Profit curve to exponentially increase. As your risk goes down, then your compounding can go up.

Being up MORE than 100%-200% in your account, during any amount of time is reckless, especially if that was achieved in a short time frame. Withdraw IT NOW and repeat.

When you're up more than 100%, chances are now you are using larger lots to trade. As your lot size exponentially increases, the size of loss also exponentially increases, bring you back down to 0% just as fast.

I'm not saying don't use compounding - just use it wisely and ensure you have pulled out profit too.

Secret: Remember profits and loss are BOTH mean-reverting!!

#3. The Black Swan - will - happen. That is the - only predictable - thing about the Black Swan is that it - will - happen. The only - unpredictable - thing is WHEN. Not IF.

Where will your money be when it does?

Control your GREED.

Always remember that if you're beating the bank interest (or lending) rate, or the ROI of most real businesses. You're succeeding.

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Dang Anum
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Postby Dang Anum » Thu Jan 24, 2013 7:16 am

Im following... More please

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newscalper
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Re: Are YOU afraid of the BLACK SWAN?

Postby newscalper » Fri Jan 25, 2013 11:08 am

xtremeforex wrote:The Black Swan is an UNPREDICTABLE event when the market makes a sudden enormously drastic move in a direction unfavourable to your positions. The chances of blowing your account are high, without a stop-loss. People with stop-losses may survive, but usually all of their accumulated profits are wiped out.

While this may seem ok at first for stop-loss users because they didn't blow up. The frustration begins every-time they have accumulated profits and just at that time another black-swan occurs and the process starts all over again (major waste of time).

I don't use a stop-loss (but I do use a way to calculate loss) but I have avoided the devastation of the black swan when they have happened.

There are people out there that would say this:

"people who don't use a stop loss will accumulate profits but eventually they will blow up and lose everything when the market makes a sudden move the wrong way.."

I disagree. [color=red]You can only lose what you leave in the market or account.[/color]

#1. Pull out profits on an on-going basis. How much you pull out and how often, depends on your strategy's ROI and speed of attaining.

#2. Stop the reinvesting ALL profit to make larger gains (compounding). Your primary goal should be to have your initial deposit withdrawed first. Your risk goes toward zero the more you pull out toward your initial deposit. Making your Risk curve exponentially decrease is more important than your Profit curve to exponentially increase. As your risk goes down, then your compounding can go up.

Being up MORE than 100%-200% in your account, during any amount of time is reckless, especially if that was achieved in a short time frame. Withdraw IT NOW and repeat.

When you're up more than 100%, chances are now you are using larger lots to trade. As your lot size exponentially increases, the size of loss also exponentially increases, bring you back down to 0% just as fast.

I'm not saying don't use compounding - just use it wisely and ensure you have pulled out profit too.

Secret: Remember profits and loss are BOTH mean-reverting!!

#3. The Black Swan - will - happen. That is the - only predictable - thing about the Black Swan is that it - will - happen. The only - unpredictable - thing is WHEN. Not IF.

Where will your money be when it does?

Control your GREED.

Always remember that if you're beating the bank interest (or lending) rate, or the ROI of most real businesses. You're succeeding.



I think you need to check ToS with your broker before stating that as blanket fact.

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mysticalchemist
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Postby mysticalchemist » Fri Jan 25, 2013 10:19 pm

Hi xtremeforex. You have put the situation quite well. I agree with your conclusions and practice 100%. I suspect those that can't see this are long timeframe traders.

Thanks

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