Last October, Charles Kirk from The Kirk Report interviewed Mike Bellafiore, author of One Good Trade: Inside the Highly Competitive World of Proprietary Trading. With recent requests for a more in-depth interview, Mike and Charles have brought us a deeper look into the world of trading. You catch the entire interview here.
One Comment on “Q&A With Mike Bellafiore and The Kirk Report”
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I was somewhat surprised to read about the difficultly that traders can have calculating reward/risk ratios, to the extent that it made me question whether I did myself. My understanding was that in most range trading scenarios, reward/risk is (basically) calculated by the relative distance between stock price and the target end of the price range over distance between stock price and the losing end of the price range. So if SPY is trading between 119 and 117.5 (within a range of 1.5) and the stock is going sideways at 118, you’re looking at a 2/1 reward/risk ratio for a buy. If it’s on an upward trend my guess is that your odds increase. Also, if you’re near the bottom of a second and smaller range (within the larger range) I suppose you’d be looking at a reward/risk amalgamation in combining the two range sets together for an averaged ratio (which could then be adjusted to account for the importance of the two ranges with respect to one another).
For example see SPY graph on Thursday vs. Friday. Does the range play on Friday become a less reliable trade because it resides within a larger range on Thursday?