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Chapter 33, Part I. Risk Management Framework. Page 2

Discussion in 'Complete Trading Education- Forex Military School' started by Sive Morten, Dec 28, 2013.

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  1. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Commander in Pips: That’s why if some trader just approximately counts up in his head acceptable loss and in hasty rush runs to use his trading software, then we might say that his plans are in a bad way. This is more a gambling plan rather that a serious and long-term business start-up plan.

    We even could say more clearly – trading without money/risk management is gambling…

    Pipruit: Well, but I have a chance to get a jackpot in Vegas…
    Commander in Pips: Right, and I will be very happy if it will happen to you. But did you ever think why casinos work? Why they lose money on multiple jackpots that are happening day by day but still work and their owners feel very happy?

    Pipruit: Well, I suppose because they earn more than they lose…
    Commander in Pips: Right. But how this is happening? Do they know that they earn more in advance or this is just a coincidence of circumstances? And they find out it just occasionally works for them?

    Pipruit: Hm, I don’t think so. Gambling is a big business, so with casinos, it has to be planned carefully.
    Commander in Pips:Here is your answer. To have a chance to be profitable you have to foresee and plan to be profitable. In case of a casino this is statistics and laws of big numbers. They know in advance that they have some greater probability to win than the average gambler. Maybe this favorable differential is small, say 3-5% but when there are thousand of gamblers – this works for the casino. In general they earn 3-5% from overall money turnover.
     
    #1 Sive Morten, Dec 28, 2013
    Lasted edited by : Oct 9, 2016
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