Q: If managers are betting more on certain trades, in a systematic way, then how do they decide when to bet more or less? I assume this is a matter of a higher odds trade based on historical testing, but I am not completely confident in my conclusion here.
A: You are right. There are certain trades that have higher probabilities, but have varying degrees of payoffs. Thus, you have to adjust your position size so that you always trade with the highest mathematical expectation. You can also study price and volume history and measure the average short-term, intermediate-term, and long-term $ and % moves.
Latest posts by Michael (see all)
- How to Unlock Enormous Potential Hidden in Your Daily Routine - October 23, 2017
- How to Manage Your Portfolio for Attractive Gains - October 20, 2017
- 2 Reasons for Poor Trading and How to Guarantee Improvement - October 19, 2017