Some Things Seem True, But . . .

Just Because They're Repeated Doesn't Make Them True . . .

By George R. Harrison

The Myth of Risk-to-Reward

Every so often, maybe once a year or so, I receive an inquiry about Risk/Reward ratios. Well, my conclusion after 50-years or so is that they're largely an institutionally-taught illusion having little reality in the real world at all.

Every risk in real life is different according to the risk-management profile of the individual trader. What's more, each and every gain calculation is only theoretical and can only be theoretical.

In short, Risk-to-Reward is a mere guess that has no foundation in Reality; only in what we'd like Reality to be. With no basis for either number, what good will the resultant ratio be?

Well, that's my observation based on my experiences anyways.

I've watched good traders go down with trades that had great Risk-to-Reward Numbers while trades with dismal numbers 'woke up' suddenly (and, unexpectedly) to make gains undreamed of and beyond the anticipation of Risk-to-Reward calculations of any kind.

In the end, the risk of a trade is up to you, the trader, and the reward is different every time. People who give those numbers are following a system that can only and which will fail because the formula's basic premise is flawed and un-rooted in reality.

Natural law means following Nature and it's structures, and Nature is not as systematic (in the consistent way that mankind is seeking) regular in doling out her rewards on the short-term as we'd like.

But, she does build trends based on variable outcomes combined over time.

The keyword here is 'variable'. As Nature herself is variable, how can one produce an unvarying & reliable Risk/Reward Ratio when this ratio is based on Natural Law as applied to the variable markets. You see the problem? Think on it a bit.

Thinking outside of the conventional BOX is hard for some people, they want rigid rules but, rigid rules break and betray them in the long-term.

That is what's happening in the world today, people have been following 'Fantasy Rules' and they're finally becoming painfully aware that the World isn't responding to their wishes or tantrums. Their collection of 'rules' aren't working. They've strayed too far from Nature, it's natural mathematical design and, Rules that actually DO WORK.

I give all my trading clients their due respect as to how they wish to apply the methods they learn. It's their Life and their decision on how they want to run it.

That's what Freedom's about; freedom to choose your own way and Path. Of course, that said, there are 'hard' paths and 'easier' paths out there to take.

I've seen clients take huge, 'shoot-the-moon' risks with normally close stop methods that have worked excellently in  the past, by 'bending' the rules because of their personal whims. That's their Choice. The consequences are theirs as well.

I've also seen other clients take the simplest of methods and make fortunes by Disciplining themselves to control risk and by being Patient. Their Rewards were guaranteed as well. They chose the 'easier' Path of Consequences by being harder on themselves through Discipline and Patience. They chose Wisely.

Who can fault it? It's a Perfect System at work and, we all get our deserved rewards from Wisdom or deserved punishments by 'cutting corners'.

In either case, the Risk/Reward formulas for either type of trader meant nothing in the end as Trader Behavior Overrules Everything. - (C) 2017 - GR Harrison, USVI

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Are you ready? Are you seriously interested in learning some of our unique trading techniques? Then take a few moments to E-mail me HERE. The new Catalog of our offerings is now available.

     Opportunity Is Where You Find It . . .

While Most Were Looking At The Stock Market's 1.39% Gains . . .

By George R. Harrison

Continuing our discussion of just where to look for Profit Opportunities, let's take a look at objective performance numbers and use them as a guide for a moment. Let's see what Opportunities presented themselves:

Let's take a short time period, like a month's time for instance; Just what kind of gains have taken place in the markets most investors are participating in like the Stock Market.

That's where the majority are taught to place their faith. Just how well did it pay off over last month? Well, the S&P 500 Cash market paid a whopping 1.39% over last month. The Dow Jones Index? Not quite that good at only 0.72%.

Granted, you could have done a little better by employing the leverage found in futures or options, but, was this really the 'golden ticket' for gains? Not at all.

Here's a different figure for returns during the same time period: 18.21% gains for the month. What Market? Again, one that's rarely looked at; Rough Rice, a futures-traded Commodity. Ah, that's Better!

The Rough Rice Market Made 18.21% Gains . . . On Cash!

How about Cocoa at 10.92%? Or Lean Hogs at 10.71%? Even one of the Grains, Oats, put in a good performance of 8.66% over the last 30-days.

And, I've only presented the LONG trades here so far.

It turns out that there were several notable gains on the SHORT side in some of the other commodities. And, these are futures markets where you can just as easily go short (Sell) as you can go Long (Buy).

Orange Juice has a gain from Selling of 16.1%. Live Cattle performed well by declining 9.71%, while Lumber went down by 8.29%. Sugar pulled back by 7.87% and Natural Gas declined by 5.77%.

All of these markets could have been profited from (by being on the right side, of course!). Opportunity was there and, I can guarantee that almost no traders (except the Professionals) came even close to considering the markets mentioned.

80% of traders don't even consider Selling markets short. That leaves the 20% minority who will sell short without much competition to crowd them. It's really too bad, but, these are numbers you can work with and profit from.

Declining markets should hold NO FEAR for the master speculator.

We deal in TECHNIQUE; Masterful Techniques that can be applied equally to Long or Short Market Opportunities.

I hope this lengthy list of Opportunities that presented themselves over just the last month will awaken a few to the wonders that lie out there beyond the newspaper and media doom-and-gloom promoters.

Doom, Gloom and Depression won't help you move on to the next level.

SKILL and a sharp eye for where Opportunities are taking place WILL. - George

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Are you ready? Are you seriously interested in learning some of our unique trading techniques? Then take a few moments to E-mail me HERE. The new Catalog of our offerings is now available.