What is a high-risk strategy?
It is a strategy that one trader can lose 100% of his or her equity. Most people avoid investing in high-risk strategies. Of course, nobody wants to lose money. However, there are considerations that you can think about it.
First, high-risk strategies can be profitable, but a trader must understand how to manage them. The main point is to understand what is the probability of losing 100%.
For example, let’s consider one strategy that can perform 15% monthly. Looking at this number, I can guarantee you that strategy you have a considerable drawdown at some point. How do I know that? Look at our calculator and simulate any initial amount within 15% monthly for 20 years. You will see that this amount of money is unrealistic. That’s why it cannot be used for long-term investments. However, if you have a rough idea of how often those significant drawdowns will occur, you can make money. Back to our example, the equity will double after every five months, which means that if the drawdown takes longer than five months, on average, it will be a profitable strategy.
How can I address that strategy?
First, you must invest a small amount of money because there is no guarantee that the next drawdown will occur today or tomorrow.
Second, you need to withdraw your profit constantly or at least the same amount as your initial deposit.
These techniques will guarantee that you will keep your money safe, and you will probably make some money.
Do you invest in high-risk strategies?
Yes, I do, but I understand it is a very personal concept related to each risk acceptance. Most of my high-risk strategies are running for fun.