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The Way to Trade: Discover Your Successful Trading Personality by John Piper

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Chapter 10: SYSTEM PARAMETERS – THE THINKING BEHIND SYSTEM DESIGN

In the market there are two types of risk. There is the risk of losing money and there is the risk of losing a lot of money. As there are no free lunches you can expect the three trading vehicles which we are discussing to offer a balance against these two types or risk and this is what we find. If we buy options we have a nil risk of losing a lot of money (defined as more than your original stake) as all we can lose is what we paid for them in the first place. But if we buy options we find that we normally lose money. If we decide to write options (which I am treating as ...

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