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The Trade Busters
124 - First Principles: Volatility Steals Your Edge
Feb 21, 2024
Discover how volatility affects trading strategies, learn about the 'volatility tax', and understand how losses can compound faster than gains. Explore unique ways of thinking through sizing, risk, and leverage in option strategies.
19:55
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Quick takeaways
- Focusing on win and loss sizes, not just win rate, helps manage risk profiles effectively.
- Understanding and accounting for geometric returns versus arithmetic returns is crucial for optimizing trading strategies.
Deep dives
Volatility and Volatility Tax Impact on Trading Edge
The podcast discusses the impact of volatility and volatility tax on trading strategies. The speaker emphasizes how volatility can erode one's trading edge and presents the concept of expectancy hacking to address this issue. By focusing on factors such as win and loss sizes instead of just win rate, traders can better manage their risk profiles.
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Discover
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Listen to the best highlights from the podcasts you love and dive into the full episode