Trading system deals with: What situation to enter, and what situations to exit.
MM deals with, when you are going to enter, how many lots should you enter at?
Random entries with carefully planned exits and very good MM are known to make money.
Probability: With expectancy; you deal with win% and payrate. You increase your win%, usually at the cost of your payrate. Or you can increase your payrate, at the cost of win%. If you establish a system where your expectancy is > 1, then your system will be profitable long term, assuming you have the correct MM.
Whenever I have a new group of students, we start off by playing the "flip a quarter" game. Flip a quarter, and you guess heads or tails. If you guess right, you win 2x what you bet, if you guess wrong, you lose your bet. Having a positive expectancy, almost all my students STILL lose money, or make so little that if there was a commission or bid/ask on it, the rake would have taken all their profit.
So in simple postulate format:
1) The Best MM in the world doesn't help if your expectancy is < 1.
2) Even if your expectancy is > 1, if you have no MM that is profitable, you can still lose money.
This thread is focusing on the MM portion... specifically the Optimized Risk vs Reward Equation. (Says so in the thread title!! Imagine that!!)
MM deals with, when you are going to enter, how many lots should you enter at?
Random entries with carefully planned exits and very good MM are known to make money.
Probability: With expectancy; you deal with win% and payrate. You increase your win%, usually at the cost of your payrate. Or you can increase your payrate, at the cost of win%. If you establish a system where your expectancy is > 1, then your system will be profitable long term, assuming you have the correct MM.
Whenever I have a new group of students, we start off by playing the "flip a quarter" game. Flip a quarter, and you guess heads or tails. If you guess right, you win 2x what you bet, if you guess wrong, you lose your bet. Having a positive expectancy, almost all my students STILL lose money, or make so little that if there was a commission or bid/ask on it, the rake would have taken all their profit.
So in simple postulate format:
1) The Best MM in the world doesn't help if your expectancy is < 1.
2) Even if your expectancy is > 1, if you have no MM that is profitable, you can still lose money.
This thread is focusing on the MM portion... specifically the Optimized Risk vs Reward Equation. (Says so in the thread title!! Imagine that!!)
google: