Just keep in mind that instruments of leverage are a double
edged sword. When you put up $5,000, as you say, through one
of these instruments, you are in fact risking more than when I put
up $5,000 to buy shares in a stock. Here's why: We always
have to keep in mind we could be wrong and we may lose the trade.
So, if I put up $5,000 on a stock and the position moves
against me by 1.5%, I lose $75.00; but if you're wrong by 1.5%, you
LOSE $1,000. In effect, you are putting more at risk than I
am (risking $1,000 to make $1,000).
Your play offers greater leverage than mine, which is great if
your right (and yes, you do need to be right more often than I do).
My approach is different. Having been a professional
horseplayer, I see value in risking little to make a lot.
Stops help me do that since my downside is limited while my
upside is open-ended.
Anyway, best of luck trading whatever you're most comfortable
with.
Thanks, Morgan. As you say,
Why the obsession with AAPL??
Posted by RichieD on 17th of Nov 2012 at 10:36 am
to each his own.
Just keep in mind that instruments of leverage are a double edged sword. When you put up $5,000, as you say, through one of these instruments, you are in fact risking more than when I put up $5,000 to buy shares in a stock. Here's why: We always have to keep in mind we could be wrong and we may lose the trade. So, if I put up $5,000 on a stock and the position moves against me by 1.5%, I lose $75.00; but if you're wrong by 1.5%, you LOSE $1,000. In effect, you are putting more at risk than I am (risking $1,000 to make $1,000).
Your play offers greater leverage than mine, which is great if your right (and yes, you do need to be right more often than I do). My approach is different. Having been a professional horseplayer, I see value in risking little to make a lot. Stops help me do that since my downside is limited while my upside is open-ended.
Anyway, best of luck trading whatever you're most comfortable with.
all agreed richie
Posted by morgan8 on 17th of Nov 2012 at 11:52 am
answer is i will risk $200 to make $1000 but not 1:1, and will not risk 2.0% of account on a trade.
so how does the switch from horses to stocks work for you, is there some crossover?