Sunday, August 24, 2014

Risk vs. Return vs. Time

There is a law that states that your returns are directly proportional to the risk you take.
Risk can be your money, life, time and etc, it is the cost of getting a return.

In the financial world, 
Higher Risk = Higher Return
Higher Return = Higher Risk
vice versa.

Example, you are doing a traditional business.
You invest USD100,000 and get 10 times return on investment within 10years.
In 10 years you get USD1,000,000 but your risk is still lower than who invested USD1,000,000.
He can get USD10,000,000 in 10years time.

It is the same in Forex trading business.
The more you invest, the return you get is higher than others within the same period of time.
In order to get high return, either you invest more money or invest in high frequency trading.

High frequency trading, you can earn very fast but it can makes you lose faster too.
That's your risk.

How much return you want, depends on how much risk you can take. It's stressful.

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