A Game Of Money Management

Let's start with a winning rate of 60%. You have 1000 yuan and 100 chance to bet. Odds ratio 1:1., then how can you make the bet to get the best return? When looking at the following, I suggest you think about this first.

According to the survey, most people tend to make more bets under adverse circumstances and make fewer bets in favorable situations.

In response to the market, people often expect a rise after several successive drops.

After several successive rises, there is expected a fall.

But this is just a gambler's fallacy, because the opportunity to profit is still only 60%.

At this point, capital management is extremely important.

Suppose you start this game at 1000 yuan, and you lose three times (which is very easy to encounter from probability). Now your capital is only 700 yuan.

So, most people will think that the fourth time will win, so the bet increased to 300 yuan (to save the loss of 300 yuan), although the probability of four consecutive losses, but there is still a possibility.

Well, you have only 400 yuan left. To win the loss in this game, we must make a profit of 150%.

If you enlarge your stake to 250 yuan, then you will probably go bankrupt after four games.

In either case, it is impossible to make profits in this simple game.

Without the concept of capital management, the risk is too great to achieve a balance between risks and opportunities.

People always like to make profits quickly and leave a little room for losses. The result is cutting profits and expanding losses.

In the long run, how can we increase the value of capital? Let us remember these figures: 20% of the loss needs 25% of the profits to achieve profit and loss balance, relatively easy, 40% of the loss needs 66.7% of the profits, to achieve very difficult; and loss of more than 50% need 100% profit, almost impossible to lose.

For my personal experience, 20% of the loss should be the limit of loss.

In this game, if I simply bet 10 yuan each time, then my capital will reach 1200 yuan in the end.

Of course, there are better ways to bet.

By comparing several ways of betting, it is clear that different betting methods produce completely different results.

It can be said that understanding the importance of capital management has also begun to understand one of the biggest secrets of trading.