Axiory Andrea

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RISK VS REWARD Insightful strategies from a World Cup Trading Champion

Andrea Unger


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A B O U T M E

Andrea Unger

*1966

Master of Science degree in Mechanical Engineering - 1990

Employed from 1992 to 2001 in technical/commercial

Positions at multinational companies

Full time trader since 2001


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1 S T P L A C E 6 1 %European TopTraderCup

2005

1ST PLACE 672%, 115%, 240%World Cup Championship of Futures & Forex Trading

2008 - 2010

F I R S T I T A L I A N B O O K

O N M O N E Y M A N A G E M E N T

S O M E

S U C C E S S

S T O R I E S


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S O M E

S U C C E S S

S T O R I E S


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S O M E

S U C C E S S

S T O R I E S


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S O M E

S U C C E S S

S T O R I E S


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S O M E

S U C C E S S

S T O R I E S


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S O M E

S U C C E S S

S T O R I E S


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S O M E

S U C C E S S

S T O R I E S


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V A R I O U S

T Y P E S O F R I S K


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H O W D O E S I T W O R K ?

M A R T I N G A L E

To increase units after a loss and to decrease after a Loss

A N T I M A R T I N G A L E

To decrease after a loss and to increase after a win


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M A R T I N G A L E

A psychological aspect of thinking that a trader should double their losses after each

losing trade in order to return the trader to a profitable state. This is the false belief that

after a losing streak the probability of having a winning trade increases, and vice versa.

In reality, every event has the same probability!


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A N T I M A R T I N G A L E

This method tries to take advantage of winning periods and protects the capital during

losing periods. An easy approach to this is to use a constant percentage of risk.

For example:

A 2% risk of capital is equivalent to increasing exposure after a win and reducing it after a

loss (after a win the capital increases and so does the 2%. Likewise, when the capital

decreases, so does the 2%).


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M A R T I N G A L E E X A M P L E

Martingale would make sense only incases of infite capital, but since this isnt

possible, why waste our time with it?...

$$$$$$$$$$$$$$$

$$ $

$ $ $ $ $ $ $ $

$ $ $ $

No money left

} }}first bet

secondbet

third bet

fourth bet


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T H E P O W E R

O F P O S I T I O N S I Z I N G

To use the AntiMartingale approach, the most typical method is to fix the percentage of

risk per trade and then size the position accordingly.

Does this approach produce consistent results in any case?


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THE POWEROF POSITION SIZING Strategy 1


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Basic Strategy with fixed100.000 lots

Position Sizing appliedwith 1% risk per trade

Final profits become4 times greater


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Basic Strategy with fixed

100.000 lots

Position Sizing appliedwith 1% risk per trade

Here as well, final profitsbecome more than 4 times

greater


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Position Sizing applied with1% risk per trade

What happened?Final profits are

10 times LOWER?


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The low number of tradesfrom the previous strategymay have compromised the

leverage effect. Lets nowanalyse a strategy with many

trades


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Position Sizing applied with1% risk per trade

It doesnt work, final profitsare still lower then theoriginal...


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T H E P O W E RO F P O S I T I O N S I Z I N G

A simple fixed percentage risk on every trade leads to completely different scenarios

depending on the strategies

Length of positions and the maximum losing position have a strong impact on the final result

A valid alternative would be to adjust the positions size based so far on the maximum losing

trade, on the worst day scenario

Doing it this way, we base our exposure on the maximum percentage of loss our equity

could have on any given day


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T H E P O W E RO F P O S I T I O N S I Z I N G

Diminishing Risk from 2% to 1.5% and putting it all together:

Strategy 3

Strategy 2

Strategy 4

Strategy 1


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THE POWEROF POSITION SIZING Portfolio of 4 strategies


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C O N C L U S I O N S

Final shape of leverage Equity curve changes depending on various parameters:

- Stop Loss

- length of trade

- Number of trades

-

Maximum loss

Single lot Strategies may lead to similar results, but once Position Sizing is applied

the scenario may change dramatically

To properly mix risk and reward, it is a good idea to focus on the expected loss per periodrather than a single trade loss, this leads to a better equity line development

Once all this is put together, the cooperation effect leads to skyrocketing profits


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C O N C L U S I O N S

Higher % of risk on each trade Lower % of risk on each trade

Higher Return

Faster Return

High drawdown

Risk of ruin

Soft growth

Steady income

Slower returns

Lower equity increase

T A R G E T


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