The downside risks of investing

The downside risks of investing 

I wrote an article entitled "€ œWhat is the risk Worthâ €? Few months ago, the thought of a possible better way to explain some of the reasons, accept the downside risk of investment. This idea stems from writing my four stage series of successful investors left behind the idea in my mind. IA € ™ has a very comfortable, because I started to invest in the relationship with the risk of my money into brokerage accounts for many years I have not been specified using the the next 10 years or more at any time, and occasionally downtime and no € ™ t bother me, because I believe that given enough time, the market recovery. 

A couple of years ago than it is now busy working, I rarely have time to focus on investment, especially babies at home. I read the prediction market, pure. I joined, and soon found a trading patterns work for me. Every night before going to sleep, I entered two orders, one that at 10:00, the Dow Jones Industrial Average (DJIA) will not receive more than 75 points, and one said the Dow Jones Industrial Average closed below -75, 2009 10:00 AM daily. I guarantee that if two dozen small probability will win, the other would not. 

Buyers in prediction markets provide a price they are willing to pay in the event likelihood and sellers price, they are willing to sell the possibility that the event will not happen. Price depends on the likelihood or probability of occurrence. If the contract is a coin toss bid / ask prices should always be 50/50 or so. If the contract is a rolling sixty-one dead bid / ask should be 16/17 or so, that one in six chance. Not too much deeper understanding of prediction markets, a brief explanation of these contracts is that they are only open about 12-18 hours, when you close all the money within five minutes to solve. Emotions played a huge roll in determining the price declared on the basis of what news every morning. 

I play the odds and is $ 0.50 every morning to sell the contract. If I sold 100 contracts IA € ™ D for $ 50, if I'm wrong my prediction IA € ™ ð lose $ 950. I was able to make one or two jobs, no money to 10:00 am every day to stay in risk. I spent a great risk of losing a large percentage, but I lost the probability is very low. Of course, I did not € ™ t start selling 100 contracts per day. I slowly increased my contract based on the number, and I have so much income. Finally, I know I can always trade in half, but $ 1.50 per contract, rather than 0.50 yuan, which makes me a good day in the off-day profits and losses $ 150 $ 850.

 When I was really lucky IA € ™ Ð it was sold, contracts $ 300, while the Dow Jones Industrial Average and is not crossing over € ™ t close to or below 75 up or down. Every three days so that I can deal with the day, still up $ 50. If you hold these odds and I trade only once a week, IA € ™ ð nearly 6% of income per month (50/850). As luck, and I picked a good time to work on my model, and quickly rose a few thousand dollars. I started regularly withdrawals to make sure I do not € ™ t loose any of my initial investment. Finally, I'm just a œplayinghouseâ € ™ Şmoneyâ? And began to make bigger industries. Down three days later, in the 11 trading days, I finally gave up the experiment. I have just over 100% return in a year. My whole plan is the work of the model until it did not work. I can continue to work, but I decided to stick to my original plan, when I put my profits still have them. This also coincided with my work slowed down and become a toddler son, the two gave me more time to research stocks and more sleep. 

Towards the end of me, I suddenly realized that I could make those $ 300 + - industry profits or even more frequently, sometimes even less downside risk option. Slowdown busy day at the office at that time, I moved my focus back to stock and options, based on the probability of risk management, while continuing to leverage othersâ emotional refocus. I rarely lose more than a few hundred dollars of options trading, which makes it a very low probability of risk. I admit, I would lose my trading and management of the percentage, do not extend himself so far, I will destroy, if there is a sudden market adjustments, and even the risk of recession. This is the percentage of each investor trading losses will vary. The important point is to recognize it and its surroundings modeling.