DailyTitle: Professional stock trading --- design and automation
Copyright 2003
Author Mark Conway
Risk/Reward Ratio is a measure tool to judge your trading level
Winston churchill
we shape our buildings, and afterwards
our buildings shape us.
the trading systems have been designed with one goal in mind:
consistent profitability based on a unique market insight.
the last point to emphasize is that price leads news.
Instead of reading to the news or analyst recommendations,
strive to develop trading systems that detect unusual price movement.
Deploy a diversity of trading system, and watch for combinaitons of signals
in the same direction. when signals conflict, avoid the trade.
Trading system
System | Identifier Timeframe Complexity |
Float | Acme F Daily, Weekly High |
Movie trail
http://www.movie-list.com/p/pi.html
Pi (1998) motion picture --- fiction of Maximillian Cohen
http://www.imdb.com/title/tt0138704/quotes
Restate my assumptions: One, Mathematics is the language of nature. Two, Everything around us can be represented and understood through numbers. Three: If you graph the numbers of any system, patterns emerge. Therefore, there are patterns everywhere in nature. Evidence: The cycling of disease epidemics;the wax and wane of caribou populations; sun spot cycles; the rise and fall of the Nile. So, what about the stock market? The universe of numbers that represents the global economy. Millions of hands at work, billions of minds. A vast network, screaming with life. An organism. A natural organism. My hypothesis: Within the stock market, there is a pattern as well... Right in front of me... hiding behind the numbers. Always has been.
Inspiration lead some serious research going on in Wall Street.
My statement is nothing exit there while you try to find. That is all about tragedy.
Risk/Reward Ratio
http://www.investopedia.com/terms/r/riskrewardratio.asp
A ratio used by many investors to compare the expected returns of an investment to the amount of risk undertaken to capture these returns. This ratio is calculated mathematically by dividing the amount of profit the trader expects to have made when the position is closed (i.e. the reward) by the amount he or she stands to lose if price moves in the unexpected direction (i.e. the risk).
Let's say a trader purchases 100 shares of XYZ Company at $20 and places a stop-loss order at $15 to ensure that her losses will not exceed $500. Let's also assume that this trader believes that the price of XYZ will reach $30 in the next few months. In this case, the trader is willing to risk $5 per share to make an expected return of $10 per share after closing her position. Since the trader stands to make double the amount that she has risked, she would be said to have a 2:1 risk/reward ratio on that particular trade. The optimal risk/reward ratio differs widely among trading strategies. Some trial and error is usually required to determine which ratio is best for a given trading strategy.
20V5 to 15 -25% va 20^10 to 30 +50% 2:1 risk/reward ratio
20V5 to 15 -25% va 20^5 to 25 +25% 1:1 risk/reward ratio
the process or wave ---- 20 -->15--->20--->25 jogging there are momentary loss max vs accmulate until reach 25 stop
