On Thu, Jan 7, 2010 at 12:00 PM, Mojo <beeper212@yahoo.com > wrote:
3) The lure of high probability trades <cough cough "iron condors"> cause more account death than anything I've ever seen. High prob should be taught last if at all.
Coincidentally, I just mentioned high probability trades. I don't equate high prob to ICs. Perhaps the people selling IC advisory services make this assertion. And no novice trader should be tinkering with multi-legged positions.
I think of high probability by looking at the risk profile. And I plunk a ticker into the tos and see if the Spread Hacker gives me an appealing probability. If I know the underlying, I'll put on the trade in size. If I don't know the underlying too well, but it's a strong candidate coming out of my screening process, then I'll put on the trade in small size and document its performance for a few expiration cycles, then scale the size. If I find a particular trade is not as profitable by average as other trades, it will be culled from the program and noted -- sometimes I go back and look at pilot error, sometimes I see market changes and sometimes I just don't see a provable cause. Reading Aronson on "Evidence Based" trading has helped me focus on objective performance measurement. I consider this a good combination of risk-return and high probability trading.
--
Adam
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