Defining risk - what does it mean to you?

The sport of kings.
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ruthlessimon
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LucyLoo wrote:
Sun Nov 19, 2017 3:19 pm
"The 3rd is stable (scalper)":- Known known
"The 3rd is stable (swinger)":- Known unknown

"The 2nd is drifting, I will lay":- Known known
"The 2nd is drifting, I will back":- Known unknown
Those last few examples are interesting. Both traders agree on the information, but both are taking completely different risks. Almost a paradox - & technically both can be profitable with the right timing
Korattt
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Joined: Mon Dec 21, 2015 6:46 pm

ruthlessimon wrote:
Sun Nov 19, 2017 3:27 pm
LucyLoo wrote:
Sun Nov 19, 2017 3:19 pm
"The 3rd is stable (scalper)":- Known known
"The 3rd is stable (swinger)":- Known unknown

"The 2nd is drifting, I will lay":- Known known
"The 2nd is drifting, I will back":- Known unknown
Those last few examples are interesting. Both traders agree on the information, but both are taking completely different risks. Almost a paradox - & technically both can be profitable with the right timing
depending on market conditions
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Kafkaesque
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Joined: Fri Oct 06, 2017 10:20 am

xitian wrote:
Sun Nov 19, 2017 2:21 pm
Here’s my stab:

Risk is the probability and associated cost of something not turning out to be what you expect (or want) it to be.

Every decision you make in life has risk. You would generally expect a high reward to compensate you for taking a high risk. Doing well at trading or gambling requires you to be good (accurate) at estimating risk such that you can make choices where the reward more than justifies the risk in the long run.

Edit: For example, imagine you are bad at estimating risk. You will either miss opportunities where the risk was worth the reward because you miscalculated the risk to be higher than it was. Or alternatively you will pick bad choices where the risk was greater than the reward by miscalculating the risk as being lower than it was.

Obviously it can be more complicated than that if there are many factors and/or subjective factors involved. The correct decision for one person might not be the same for another. Plus the decision you make will depend on how well you handle higher levels of risk (potentially regardless of how high a reward).
For a stab, that's pretty darn good ;)

I know a few game theory nutters who'll absolutely talk your ear off about this stuff!

You're correct in every decision having risk. Most people need to get in a car, on a bike, a train or whatever to go make money to survive (unless they're one of those god awful people sitting at home trading for a living :lol: ). The piece, I feel, you're missing in the above is that there's a huge difference between the everyday stuff of driving, crossing the street etc. and risks taken with purpose.

The latter are the most interesting. My stab would be that risk is putting yourself in a situation, which is at least partly beyond your own control, where you may lose something that you're currently in possession of - in order to become in possession of more of the same, or of something different. Could be betting or trading in monetary terms, but also risking your life with dangerous sports to gain adrenaline, or risking your marriage by sleeping with your wife's sister to gain, well.... :?

Estimating risk, as you touch upon is really interesting, as having that ability along with the knowhow to then take good, calculated risks is what seperates the pack imho.
arbitrage16
Posts: 532
Joined: Tue Feb 14, 2017 7:27 pm

Diminutive, oblique, arrogant, and unhelpful....Rumsfeld, of course, what a piece of work.

'Defining risk is about defining what the market has to look, feel and sound like to tell me my edge isn't working'
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gutuami
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Jordan Peterson On Money, Risk Taking, and Finance

https://www.youtube.com/watch?v=1folk_w-CWs
arbitrage16
Posts: 532
Joined: Tue Feb 14, 2017 7:27 pm

Great shout, will watch that later, JBP is a great thinker
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