RISK and REWARD are not always correlated

bitgolden

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Quote from: justdimin on April 28, 2020, 02:46:14 PM

The intelligent investor has been around for very very long time, it is the book that Warren Buffet who is 80+ years old right now getting close to 90 has read and got interested in and talked with him, even took classes from Graham if I am not wrong. Which shows you how old the book is.

The idea is that there is methods to figuring out how much a company really worths, not the worth that the stock market gives it but the real worth because companies do have data to show that, from the revenue to profit to cash on hand to debt and many others, so you can make a calculation on what you think the company worths, and use that to see if the company is actually going for that or under or over, if you see an undervalued company you buy it.

Moreover, Warren mixed that with companies that he thought would basically be always relevant, like Cocacola or Gillette or Washington post and the likes, because they would basically be always around. None of this could be applied to bitcoin.

That is why the intelligent investor basically says never and I mean NEVER trade something you don't know well enough. Warren Buffet made over hundred billion dollars in his investment career and that dude never bought a single share of a stock that he didn't know about.

You want to know how tough he is? Dude has been friends with Bill Gates for decades, they have been playing bridge together for decades, they hang out all the time, Warren gave 30+ billion dollars to Bill's charity, basically all around BFF situation, Warren doesn't own a single Microsoft share, but he owns a lot of Apple shares.

If you do your trading with that much machinery mind and only look at the numbers and never trade anything you do not understand, eventually there will be some that actually you can understand and put 2 and 2 together to realize its undervalued and you can buy it.

Ucy

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I agree!
Skills/information is required to minimize risk. However, (in my opinion) you could start little or with what you can afford to lose in a business or trading you have no skill in order to learn from experience. You can then start scaling up the business or expand it once you start doing well or being consistently profitable.

stomachgrowls

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Quote from: leatutz on April 29, 2020, 06:56:52 PM

Quote from: thebutton on April 27, 2020, 05:57:10 AM

According to Benjamin Graham, you don't really have to take a higher risk to achieve a higher reward.

Yesterday, I came by an informative video of the summary of the book "The Intelligent Investor" by Benjamin Graham. What intrigued me the most was when it mentioned that risk and reward aren't always correlated which is very different as what most of us had heard "the higher the risk, the higher the reward." With this new perspective, I have been given a new idea that it is not always the case. There is this quote that I came across in the this informative video:

Quote

"Maximum return is not achieved by taking maximum risk, but rather by exercising maximum intelligence and skill."

It might be better for you to watch the video yourself for you to understand it even better. Here is the link to this informative video. As such, I researched further to understand it even better what does it mean. You might find this article helpful.

What does your take in this? How could you apply it in trading cryptocurrencies? Are there any interesting books, articles or an informative video just like what I have mentioned that you might wish to share?

To become more intelligent and skill, you have to put your enough effort in trade. For all this I would suggest that start with low money to control yourself and become smart. By Benjamin Graham theory I don't feel that big risk has in BTC. For high profits you have to expert to select some altcoins, there is the high risk and high profits.

Comparing between BTC and altcoin profitability then theres no doubt that alts do have it but in terms of long term aspect then you can somehow trust btc among the rest.

Yeah its true that you can really gain up knowledge and skill if you do experience things because you cant make yourself to be like that if you dont engage up into things.

Risk and reward ratio is indeed known and common since we know that the bigger the risk the higher the reward but that line been said on op does really have a point
but in just some aspects and not happen most of the time.

jrrsparkles

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Yeah, he is right you no need to take high risks to get high rewards but there is also another fact without any risk there will be no rewards so they are correlated but many not be completely proportional.In crypto you can make more with high risk and low risk as well but the time taken to achieve the desired profits will depends on which path we take to reach it.With trading the risk is more and with holding its a lot less.

davinchi

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Quote from: thebutton on April 27, 2020, 05:57:10 AM

What intrigued me the most was when it mentioned that risk and reward aren't always correlated which is very different as what most of us had heard "the higher the risk, the higher the reward." With this new perspective, I have been given a new idea that it is not always the case.

You must understand that there are always some exceptions everywhere which include technically and even philosophically as well.

Yes, I also have noticed that rewards and risks are NOT correlated. For example, if I risk some $5 and I may profit some $2 and at the same time it does not mean risking $50 will get me $20 profits because with the risk of $50 I may get profits of another $50 or $40 or even $10. So, in this case also, risks and rewards are not correlated, right? (Hope I am clear with my explanations Grin

).

At the same time, the higher you risk MAY get you higher profits but probably not in all the cases. Where and when we risk is the key here. Now, I like to link here my first point : exceptions are everywhere.

What I do believe philosophically is, if you do not risk something then you may risk all your things. So, risk in calculated way. You may risk more when you become experienced where you are making profits. So, you may risk more where you have already made lots of profits to make more rewards. Simply, do not rush while risking. Because, only slow and steady will win ALWAYS.

leatutz

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Quote from: thebutton on April 27, 2020, 05:57:10 AM

According to Benjamin Graham, you don't really have to take a higher risk to achieve a higher reward.

Yesterday, I came by an informative video of the summary of the book "The Intelligent Investor" by Benjamin Graham. What intrigued me the most was when it mentioned that risk and reward aren't always correlated which is very different as what most of us had heard "the higher the risk, the higher the reward." With this new perspective, I have been given a new idea that it is not always the case. There is this quote that I came across in the this informative video:

Quote

"Maximum return is not achieved by taking maximum risk, but rather by exercising maximum intelligence and skill."

It might be better for you to watch the video yourself for you to understand it even better. Here is the link to this informative video. As such, I researched further to understand it even better what does it mean. You might find this article helpful.

What does your take in this? How could you apply it in trading cryptocurrencies? Are there any interesting books, articles or an informative video just like what I have mentioned that you might wish to share?

To become more intelligent and skill, you have to put your enough effort in trade. For all this I would suggest that start with low money to control yourself and become smart. By Benjamin Graham theory I don't feel that big risk has in BTC. For high profits you have to expert to select some altcoins, there is the high risk and high profits.

Twentyonepaylots

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Quote from: htsy585 on April 29, 2020, 01:28:26 PM

Quote from: thebutton on April 27, 2020, 05:57:10 AM

What does your take in this? How could you apply it in trading cryptocurrencies? Are there any interesting books, articles or an informative video just like what I have mentioned that you might wish to share?

I agree with you because gone are the days when the cliche way work/hustle hard but now it has been change entirely to work/hustle smart. I believe it applies in any aspect of life especially when it has to do with investments, it is not always about taking bigger risk but the best is taking calculated risk. In a market as volatile as cryptocurrency market, taking huge risk is not an healthy choice. Although, alot of people turn billionaire through that approach but still, it isn't worth it.

I doubt there are already books about cryptocurrency trading since trading is a complex stuff and talking about it with a single book is a crap. The market changes constantly, the prices , the trend, the situation it couldn't be on the same book for a thousand of times. The best for knowledge is the internet, simply because the internet has it all.

Taking about the risk and reward, I must agree they don't corelate but when you have the market trend, you understand the situation, and you know what to happen then surely you'll get what you risked.

htsy585

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Quote from: thebutton on April 27, 2020, 05:57:10 AM

What does your take in this? How could you apply it in trading cryptocurrencies? Are there any interesting books, articles or an informative video just like what I have mentioned that you might wish to share?

I agree with you because gone are the days when the cliche way work/hustle hard but now it has been change entirely to work/hustle smart. I believe it applies in any aspect of life especially when it has to do with investments, it is not always about taking bigger risk but the best is taking calculated risk. In a market as volatile as cryptocurrency market, taking huge risk is not an healthy choice. Although, alot of people turn billionaire through that approach but still, it isn't worth it.

imstillthebest

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nice article . this is something informative and many people can learn from this instead of doing the same old yolo/all in which is verry risky but profitable too although once you loose you will lost all your funds but if we are only going to risk small and play it properly i think its also possible to achieve a big profit in the long run but its takes alot of patience too . transforming small amount to big is something that can be done overnight . i already heard many people that does this on the past

Latviand

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Quote from: maydna on April 28, 2020, 07:12:14 AM

Quote from: 24Kt on April 27, 2020, 05:53:45 PM

Quote from: Sebas.tian on April 27, 2020, 05:45:44 PM

Absolutely, but sometimes they correlate. A trader with the needed skills and the technical known how will make a good reward from a higher risk trade and come out safe. Many have seen things differently from others, I have experimented this several times and have came up with good profits at last. During the re-market of cryptocurrency, I bought stellar and one of my friend was laughing my actions but, within some times I made a good returned with over 50% and he was shocked. I took the risk and returned with reward.

The risk is worth taking if you know from your instincts that a particular project will do good. I guess, you risk on stellar because in your mind, you know this project is worth taking risk for. Because if you do not believe in a project, I don't think you will risk your money on it. So basically, it starts within yourself.

It could be true because if you don't know or don't have the right information about something that you want to invest, you will have a high risk and you will hard to make a profit. By learning more about what you invest, you will know how to reduce the risk while you will know how to increase the reward that you can get from the investment. And I agree with what you say that basically, it starts within yourself because you decide what you want to invest.

And if we related to trading, if you can have the right analysis, you will have the chance to buy the right coins, and you will have the opportunity to make a profit. But the risk will always be there, and that will depend on how we can analyze the risk.

Risk is always much worse than the reward because the probability of you losing in trading is always higher IF you're not that knowledgeable in trading. Sometimes you can minimize the losses if you know how to handle your money properly and you're intelligent enough about the possible results of your transaction. Market is not constant and you should know how to deal with that because you are the one who is responsible for the adjustment and strategies that you will make to fight the volatility of coins in the market. I know that it is not that easy but your investment is in your hand and you are responsible for manipulating that in the market. You should practice your technical analysis to minimize the risk and get huge rewards.

thebutton

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Quote from: joniboini on April 28, 2020, 09:13:10 AM

Quote from: thebutton on April 28, 2020, 05:26:04 AM

On the other hand, we can consider the risk and the reward as independent to the other. The thought that I was trying to convey, the book rather, is that the amount of reward/profit isn't always determined by how much the risk there is which is very unlike to what most of the people had believed.

It would be great if there's a mathematical equation to find where the golden point is. I agree with the idea, but practicing the calculation is difficult. DWYOR and DYOR is like doing a lot of work but you don't know which one is important and should be prioritized, which one is fine if you ignore it.

Most people seems to just throw a bunch of words about risk/reward without necessarily explaining why they do this or that.

You can check the article and the informative video that I had link in the OP about how they compute to determine their point with regard to risks and rewards. If anyone had the time to invest time to read a book or anything related that would help them especially being as a trader then it would be a good example for minimizing the risk while getting a greater reward. Don't you agree?

Quote from: gentlemand on April 28, 2020, 04:06:13 PM

Quote from: thebutton on April 27, 2020, 05:57:10 AM

Quote

"Maximum return is not achieved by taking maximum risk, but rather by exercising maximum intelligence and skill."

If you're taking a maximum risk without maximum intelligence and skill then you're a prize twat.

It seems rather obvious to me that you need to be bold to benefit. Allocating 0.01% of your net worth to Bitcoin is not going to get a maximum return. You need to apply boldness with foresight and care but your returns will only ever be bunch of what ifs if you pussy foot around. Sometimes you have to throw it down and duke it out.

The main thing I don't see when people are taking risks are their escape plans if it's the wrong one. That's what gives you the ability to fight and benefit another day.

The thing is having that mindset that to be bold to benefit isn't really accurate. There are times you need to be bold while there are times that it isn't necessary. People need to work smart. You need to understand your options and analyze if the risk is necessary and if there is a more less risky approach while benefiting you with the same amount of reward and even greater then one should be inclined to choose the latter. The misconception is that people think that reward is always associated with risk but I beg to disagree or rather you can take the words of Benjamin Graham who is also known as the "father of value investing."

Quote from: justdimin on April 28, 2020, 02:46:14 PM

Moreover, Warren mixed that with companies that he thought would basically be always relevant, like Cocacola or Gillette or Washington post and the likes, because they would basically be always around. None of this could be applied to bitcoin.

Would you care to elaborate? I am honestly interested because you seem to know more about the subject. Isn't there any idea provided by him that we may use in trading cryptocurrencies or just simple cryptocurrencies in general particularly BTC?

SatsLife

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This is exactly what Hal meant when he said:

So the possibility of generating coins today with a few cents of compute
time may be quite a good bet, with a payoff of something like 100 million
to 1! Even if the odds of Bitcoin succeeding to this degree are slim,
are they really 100 million to one against? Something to think about...

https://www.mail-archive.com/[email protected]/msg10152.html

eaLiTy

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Quote from: thebutton on April 27, 2020, 05:57:10 AM

Quote

"Maximum return is not achieved by taking maximum risk, but rather by exercising maximum intelligence and skill."

I like the quote but it is not that simple as you always need to have a mindset to make minimum risk and an aptitude and patience to follow the trends, here intelligence is when you are up to date about the entire financial market and understanding and learning about the new market and the biggest example is the BTCitcoin market, people who invested a few thousand dollars during the initial stages made a calculated investment because the risk was minimal and some made a fortune and that is the case with the stock market where they learn about the new upcoming companies and trends and invest in them before going big and that is how you make the maximum return.

gentlemand

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Quote from: thebutton on April 27, 2020, 05:57:10 AM

Quote

"Maximum return is not achieved by taking maximum risk, but rather by exercising maximum intelligence and skill."

If you're taking a maximum risk without maximum intelligence and skill then you're a prize twat.

It seems rather obvious to me that you need to be bold to benefit. Allocating 0.01% of your net worth to Bitcoin is not going to get a maximum return. You need to apply boldness with foresight and care but your returns will only ever be bunch of what ifs if you pussy foot around. Sometimes you have to throw it down and duke it out.

The main thing I don't see when people are taking risks are their escape plans if it's the wrong one. That's what gives you the ability to fight and benefit another day.

dunfida

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Quote from: maydna on April 28, 2020, 07:12:14 AM

Quote from: 24Kt on April 27, 2020, 05:53:45 PM

Quote from: Sebas.tian on April 27, 2020, 05:45:44 PM

Absolutely, but sometimes they correlate. A trader with the needed skills and the technical known how will make a good reward from a higher risk trade and come out safe. Many have seen things differently from others, I have experimented this several times and have came up with good profits at last. During the re-market of cryptocurrency, I bought stellar and one of my friend was laughing my actions but, within some times I made a good returned with over 50% and he was shocked. I took the risk and returned with reward.

The risk is worth taking if you know from your instincts that a particular project will do good. I guess, you risk on stellar because in your mind, you know this project is worth taking risk for. Because if you do not believe in a project, I don't think you will risk your money on it. So basically, it starts within yourself.

It could be true because if you don't know or don't have the right information about something that you want to invest, you will have a high risk and you will hard to make a profit. By learning more about what you invest, you will know how to reduce the risk while you will know how to increase the reward that you can get from the investment. And I agree with what you say that basically, it starts within yourself because you decide what you want to invest.

And if we related to trading, if you can have the right analysis, you will have the chance to buy the right coins, and you will have the opportunity to make a profit. But the risk will always be there, and that will depend on how we can analyze the risk.

When making an investment then it shouldnt really be like gambling.Of course you would need to study everything before you do proceed
because we know on whats stake on here and with that we do need to minimize risk as possible but in terms of investment we do really need
to risk and i do somehow agree that you should be smart and skillful to take more some advantage but it cant really be denied that
the higher the risk the higher the reward.No matter on what we do believe though as long it do benefit us then theres nothing wrong with that.

carter34

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Quote from: rexxarofmoknathal on April 27, 2020, 04:37:51 PM

I think that it's becoming less clearly whether cryptos are worth the risk in recent year, since they have not maintained the same meteoric growth seen in previous years.

I think the presence of bitcoin was really felt in 2017 when bitcoin got to highest level so far with other coins like etheruem hitting above $1000 too. For me here, bitcoin has not given up rather it will be stronger after all economy starts up again.

justdimin

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The intelligent investor has been around for very very long time, it is the book that Warren Buffet who is 80+ years old right now getting close to 90 has read and got interested in and talked with him, even took classes from Graham if I am not wrong. Which shows you how old the book is.

The idea is that there is methods to figuring out how much a company really worths, not the worth that the stock market gives it but the real worth because companies do have data to show that, from the revenue to profit to cash on hand to debt and many others, so you can make a calculation on what you think the company worths, and use that to see if the company is actually going for that or under or over, if you see an undervalued company you buy it.

Moreover, Warren mixed that with companies that he thought would basically be always relevant, like Cocacola or Gillette or Washington post and the likes, because they would basically be always around. None of this could be applied to bitcoin.

joniboini

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Quote from: thebutton on April 28, 2020, 05:26:04 AM

On the other hand, we can consider the risk and the reward as independent to the other. The thought that I was trying to convey, the book rather, is that the amount of reward/profit isn't always determined by how much the risk there is which is very unlike to what most of the people had believed.

It would be great if there's a mathematical equation to find where the golden point is. I agree with the idea, but practicing the calculation is difficult. DWYOR and DYOR is like doing a lot of work but you don't know which one is important and should be prioritized, which one is fine if you ignore it.

Most people seems to just throw a bunch of words about risk/reward without necessarily explaining why they do this or that.

Distinctin

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People may be aiming so high and they'll do something to make it possible but one thing they able to forget is the risk that is waiting up there.
High risk is also having big rewards but that wasn't as easy as we know.

Trading is really tough and at high risk compared to just investing. A trader must prepare themselves to lose and to be a loser. Some people will take the risk because they probably know what they do. They are confident enough because they know a lot compared to the average trader and gives them the courage to face the risk.

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Quote from: 24Kt on April 27, 2020, 05:53:45 PM

Quote from: Sebas.tian on April 27, 2020, 05:45:44 PM

Absolutely, but sometimes they correlate. A trader with the needed skills and the technical known how will make a good reward from a higher risk trade and come out safe. Many have seen things differently from others, I have experimented this several times and have came up with good profits at last. During the re-market of cryptocurrency, I bought stellar and one of my friend was laughing my actions but, within some times I made a good returned with over 50% and he was shocked. I took the risk and returned with reward.

The risk is worth taking if you know from your instincts that a particular project will do good. I guess, you risk on stellar because in your mind, you know this project is worth taking risk for. Because if you do not believe in a project, I don't think you will risk your money on it. So basically, it starts within yourself.

It could be true because if you don't know or don't have the right information about something that you want to invest, you will have a high risk and you will hard to make a profit. By learning more about what you invest, you will know how to reduce the risk while you will know how to increase the reward that you can get from the investment. And I agree with what you say that basically, it starts within yourself because you decide what you want to invest.

And if we related to trading, if you can have the right analysis, you will have the chance to buy the right coins, and you will have the opportunity to make a profit. But the risk will always be there, and that will depend on how we can analyze the risk.

Topic: RISK and REWARD are not always correlated (Read 347 times)