Trading Simulator Tool

Prove it for yourself- the long sought after "holy" Grail of trading has nothing to do with timing the market or picking good stocks. Success has EVERYTHING to do with the little understood (and less often PRACTICED) principles of optimum position sizing and skewed risk/reward. This video not only demonstrates those principles, but also provides instruction on how YOU can run these tests at home... And prove for yourself that you can be wrong MOST of the time on your stock picks or your timing, but still make money.

Category:

Howto & Style

Tags:

• Covered
• Call
• Married
• Put
• Safe
• Investment
• Strategy

[freedomschool]

Yes, you are correct, if you take a very large skew as in your 10/1 example there is an interaction. But if you look at my actual results in the track record of Ernie@poweropt.com you will see that I have had a 2.4 skew and only a 33% loss record. This record is only over closed positions in the last 38 months, but the positive skew did not require going to a higher than a 50% loss probability. 50% probability for a 2/1 skew is a reasonable objective.

[arniehalpern]

I understand that skew and probability are two different variables, but they are not mutually exclusive. When you skew the risk, say to 10 to 1, the probability of loss increases to approximately 90%. You are no longer "flipping a coin" when you must win 10 times as much as you lose.

[freedomschool]

@arniehalpern Skew and probability of loss are two different variables. Probability of loss has to do with how good a stock picker you are. What is the probability that your latest pick will go down?

The skew refers to the amount you will profit if the trade picked goes up vs. how much it looses when it goes down. We want the ratio of profit on up issues to be much greater than losses on down issues. Generally we are looking for a 2 to 1 ratio on gains over losses

[arniehalpern]

When you Skew the trade risk, the probability of loss is no longer 50%.

[foreshadow20]

This simulator works with stocks, but not options. Stocks eighter can go up or down, so its 50%.

Options can go up, down, and stay the same price and end up expiring worthless or with lesser value (lost all the time value). So it is in fact 33%.