What would you do - Sweet possibility v.s. Bitter certainty? | Forex Factory

Options

Permalinks
Print Thread

Similar Threads

Failure in Forex is a certainty! Prove me otherwise... 42 replies

Sweet Spot finder indicator 9 replies

Flippin' Sweet Daily Hedges 13 replies

Sweet Spots code question 0 replies

Adaptives Are Sweet! 2 replies

What would you do - Sweet possibility v.s. Bitter certainty?

  • #1
  • First Post: Jul 18, 2017 1:23pm Jul 18, 2017 1:23pm
Sweet possibility v.s. bitter certainty

"For instance, suppose you offer somebody a choice: They can flip a coin to win $200 for heads and nothing for tails, or they can skip the toss and collect $100 immediately. Most people, researchers have found, will take the sure thing. Now alter the game: They can flip a coin to lose $200 for heads and nothing for tails, or they can skip the toss and pay $100 immediately. Most people will take the gamble. To the imagined rational man, the two games are mirror images; the choice to gamble or not should be the same in both. But to a real, irrational man, who feels differently about loss than gain, the two games are very different. The outcomes are different, and sublimely irrational. "

― Benot B. Mandelbrot, The (Mis)Behavior of Markets

So tell me,
1) Would would you flip a coin for a possible gain of 200pips and risk of zero gain, or just accept the 100pips gain with no risk at all ?

2)Would you flip a coin for a possible loss of nothing and the risk of losing 200pips, or just accept the 100pips loss with no further risk ?

Please explain your answers.
The truth is hidden from you
  • #2
  • Jul 18, 2017 1:59pm Jul 18, 2017 1:59pm
I am risk averse.

I take the 100pips gain with no risk. I won't gamble that 100pips gain for a possible 200pips gain and risk of zero gain because I have no edge flipping the coin - it's pure gamble.

I accept the 100pips loss. Again I won't gamble that 100pips loss for a possible loss of nothing and risk of 200pips loss - no edge flipping the coin.
  • #3
  • Jul 18, 2017 2:10pm Jul 18, 2017 2:10pm
Quoting skyway
I am risk averse. I take the 100pips gain with no risk. I won't gamble that 100pips gain for a possible 200pips gain and risk of zero gain because I have no edge flipping the coin - it's pure gamble. I accept the 100pips loss. Again I won't gamble that 100pips loss for a possible loss of nothing and risk of 200pips loss - no edge flipping the coin.
In this scenario (I would do the same, since risk aversion is essential to me) the outcome would be a guaranteed break even.

In a gambling scenario though, the best outcome is a profit of 200 pips. And the worst is a loss of 200 pips.
The truth is hidden from you
  • #4
  • Jul 18, 2017 2:31pm Jul 18, 2017 2:31pm
On the second thought though.
I wouldn't gamble 200$ for 100$ .
However when it comes to pips, I am a strong believer of letting my profits run. As long as my loses are minimised and secured, I would let the price just do what it will.
The truth is hidden from you
  • #5
  • Jul 18, 2017 2:35pm Jul 18, 2017 2:35pm
Im a lover of sushi.
For example first I could gamble whether I could get 7 sushi or 25. I would choose to secure myself 7 sushi.
With my 7 sushis already secured which would be enough for me already. If I was given an opportunity to gamble none extra, or 30 extra. Than I would definitely gamble. If i lose, I already have my 7 sushi. If i win though, I get a wonderful extra.
The truth is hidden from you
  • #6
  • Jul 18, 2017 3:51pm Jul 18, 2017 3:51pm
I like this, it really does mirror traders thinking. They will go thousands of dollars into the red on a trade because they are hoping it will come back. Learning to take that loss....is a harsh mistress for 99% of traders. Especially when people fill their head with nonsense about no-exit as it'll always come back.
  • #7
  • Jul 18, 2017 7:24pm Jul 18, 2017 7:24pm
Quoting MaxenshteinD
Sweet possibility v.s. bitter certainty "For instance, suppose you offer somebody a choice: They can flip a coin to win $200 for heads and nothing for tails, or they can skip the toss and collect $100 immediately. Most people, researchers have found, will take the sure thing. Now alter the game: They can flip a coin to lose $200 for heads and nothing for tails, or they can skip the toss and pay $100 immediately. Most people will take the gamble. To the imagined rational man, the two games are mirror images; the choice to gamble or not should be...
If anyone plays this stupid game = having no clue about trading.
  • #8
  • Jul 18, 2017 8:03pm Jul 18, 2017 8:03pm
Quoting The-Flipper
{quote} If anyone plays this stupid game = having no clue about trading.
Actually, it's exactly What Can Separate Successful Traders from the Rest
  • #9
  • Jul 18, 2017 8:46pm Jul 18, 2017 8:46pm
I stumbled across that risk adverse argument today actually, lol. I do not think it applies to trading. Trading is not an "all or nothing" bet. It is easy to accept a loss without losing the entire sum of money risked. So, I would just go for the bet each time. There is no guaranteed risk/reward. I have to attempt each trade, because I do not know which will profit or which will lose, but I do know the cumulative result is always profit because I have no problem reversing trades, rather than marrying them to oblivion.
You cannot be extraordinary by being normal
  • #10
  • Jul 19, 2017 4:22am Jul 19, 2017 4:22am
Quoting BubaYaga
{quote} Actually, it's exactly What Can Separate Successful Traders from the Rest
Then i suggest: start tossing a coin and let an ea do the money management.
Good luck.
lol
  • #11
  • Jul 19, 2017 4:34am Jul 19, 2017 4:34am
That’s factual, certainty doesn’t exist in Forex! So, I am not interested to imagine any game based on certainty, know why? Because, it’ll may reduce my mental strength during my challenging sessions! Forex trading is all about probability! That’s way, I always use stop loss trading tool.
  • #12
  • Last Post: Jul 19, 2017 5:41am Jul 19, 2017 5:41am
Quoting The-Flipper
{quote} Then i suggest: start tossing a coin and let an ea do the money management. Good luck. lol
whether you choose to base decisions on coin toss, technical price action, fundamental news, solar flares, inside information, measuring currency strength.. - that is all besides the point
0 traders viewing now