pic by dizznbonn via Flickr Creative Commons
The trader’s Catch 22 is that high risk can lead to high returns. Oh, and high risk can also lead to devastating losses.
But the great trading dilemma is to figure out how much return you’ll receive for the risks you take. One way to estimate this risk-reward ratio is by using the Sharpe ratio.
The Sharpe ratio is named after Nobel-prize winning economist William Sharpe.
The ratio is calculated by subtracting the risk-free rate – such as that of the 10-year U.S. Treasury bond - from the rate of return for a portfolio and dividing the result by the standard deviation of the returns.
This may sound a little complicated, but compared to other ways of determining risk, the Sharpe Ratio is a snap.
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Automated Trading, Investing, Money, Online Investing AI
Automated Trading, invest, money management, risk, sharpe ratio, smart investing, strategy, trading, wealth
A few days ago, I found this interesting article on the Fast Company site about hard work. Most people think that if we work hard, then our success is guaranteed. I wonder if the idea that hard work leads to success is only half the story.
The stratospheric rise of Japan, Korea, China and other Asian countries in the last 50 years is definitely largely due to hard work. Asian students dominate many of the most competitive universities in America. All other things being equal, consistent dedication to any task will create an advantage and results.
However, there is another side to the argument. Yes, it’s true that if we work hard we will make progress. But there is an important question we need to ask.
What are we working hard to achieve? What is the goal?
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Success
Asians, career, hard work, jobs, Money, school, strategy, Success
kaibara87 @ Flickr
Humans are born hackers.
We like to experiment. We’re curious. We like to play.
This has created a species of generalists and is one key to our survival and success as a species. After all, humans aren’t the best swimmers, the fastest runners, or the strongest lifters, yet we ended up higher on the food chain than sharks, cheetahs, and bears respectively.
This undisciplined approach to exploring does not, however, help us master trading and investing. Because the market requires nearly constant attention and monitoring, the most successful investors have a solid trading strategy and a balanced approach to discipline in executing the strategy.
And discipline isn’t always interesting.
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Accelerating Technology, Business Strategy, Dreams Come True, Investing, Money, Online Investing AI, Success, US Economy
balance, discipline, Investing, Money, strategy, trading
The Little Book That Makes You Rich
is a pretty good book. It explains simply and clearly the basics of Navellier’s investment philosophy. One of the great things about his approach is that he uses a mathematical system. By his own admission, he’s a “numbers person.” And he explains why that has helped him to succeed.
Most people who trade make decisions based on their emotions. And 90% lose money. This is not a coincidence. One of the best ways to succeed as a trader is to remove our emotions. A precisely defined mathematical system is a good way to make that happen. Navellier uses such a system, and it has worked for him.
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Investing, Money, Success
buy-and-hold, Investing, Money, reward, risk, stocks, strategy
The news is dominated by stories about how rising unemployment, layoffs, and falling markets are causing massive pain for millions of people. The media assumes that everyone is powerless to improve their situation, and that they are at the mercy of their employer and the economy.
I don’t know if that’s really the most constructive approach. Yes, we are affected by the economy, but how it affects us is our choice. We can find fear and despair in “bad” news, or we can find a way to make it work for us. Yes, it’s true that many businesses are disappearing because they cannot compete in this economy. But, it is also true that as competition is reduced, the strongest and best companies will flourish, regardless of the economic climate.
Case in point, my friend Steve at My Wife Quite Her Job. Steve and his wife launched their online store two years ago, and have seen great success and profits. For the first half of this year, when the economy was “bad”, their profits rose 72%, year over year. So that leads to an interesting question. Why is it that their store is doing great, and other businesses are going bankrupt?
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Business Strategy, Dreams Come True, Success, US Economy
blogs, ebooks, economy, Investing, Money, my wife quit her job, recession, Steve, strategy, Success
Many Americans believe that these are tough times. People think that it’s difficult to get rich, lose weight, find the ultimate mate, or be happy. I humbly suggest to you that it’s not nearly as difficult as people make it out to be. They just haven’t used The Ultimate Success Process.
The Ultimate Success Process is just a step-by-step method of succeeding at anything. It’s general enough to work in any area of our lives, and it’s powerful enough to help you achieve anything. Don’t believe me? Then give it a try.
Here it is:
- Choose What You Want. No one succeeds at anything unless they have a crystal-clear idea of exactly what they want.
- Take Action! Nothing gets done by sitting around, talking about it, thinking about it, or watching TV. To make any progress, we need to take action.
- Measure Results. See if what you are doing is working. Are you moving towards your destination?
- Adjust Strategy. Choose new actions and strategy based on what you learned in the previous step. Do more of what’s working. Stop doing whatever is not working.
- Go to Step 2. Now continue the process, improving as you go along.
It sounds stupid and simplistic, but it works. And if you look around at most of the people around you, you’ll probably notice that nobody is using it. Think it might work? Give it a try!
Dreams Come True, Success
happiness, process, strategy, Success, ultimate success process
is one of my favorite financial books of all time. It's an allegory about a guy who has a terrible job, and how he overcomes challenges to achieve his dreams.
