kako
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Hi
0 - I've read many of this forum's(risk and money management) threads. and i've to thank to all contributors.
i've used a tweaked martingale MM method(not the crazy double up on each loss :| ) for a while and i found that many of veteran traders who said: "Martingale MM followers are doomed to lose their whole account sooner or later; it's only a matter of time" are right.
. actually martingale doesn't work because nothing is impossible in the market, even a 15 losing streak(consecutive loss). i've seen it with my two eyes that after 3 yrs, mkt proved me to be wrong in ASSUMING, a 15 losing streak is impossible with my precisely backtested strategy.
actually the problem of martingale method is: it assumes dependency between trades, and it's wrong to assume individual trades has any kind of dependency between em.
ok, this was story of losers. let's look for better ways of MM(=money management) which protects the capital in first place. :cheesy:
1- i have to use a Technical or anything else(astronomy maybe) etc ... tool to trade, which supposed to give me an edge in predicting which trades worth taking. then risk a tiny bit of account(say 1% of capital) on every trade(fixed fractional method). the problem is deciding abt n%.
as i read past posts, n% have to be calculated from the max DD(=Drag Down) in the past results in a considerable period. right?
monte carlo simulation is a way of deterimining this ratio right? could u pls provide a practical preferable free tool to do this simulation? or introduce me to formulas of this method to make me enable to apply them in an Excel of VB script.
this was first question of me(monte carlo practical resources for reading/applying it).
ok here's the next:
2- if we have a system with R = (No. Win / No. loss) and W = (Avg.Win / Avg.loss)
am i right in writing this:
E(efficiency of system) = R * W - 1
if we assume trading randomly(based on tossing a coin) in a random mkt with R:R = 1:1 ( say using T/P = 23 pip and S/L = 20 pip. on Eur with 3 pip spread), then E = 0.
am i right or not? this is my second question. i ask this because i've read some other calculations(say kelly's factor) which differs a bit with my calculation.
does E can give a hint to "what Fixed Fraction" (n%) to use?
3- my final question is: is it necessary to have positive Pips in the end of a period to make profit on that period?
i mean some MM gurus say: NO! absolutly not! u have to risk more on winning positions . ok true. but how could some1 know this special trade is going to be winning? it's kind of assumtion and i think it's not rational. some ppl say check ur trade's set-up with a higher TF(=Time Frame) and if it was in favor of higher TF trend, then risk more on it.
i mean is this all which is to Size management? to FEEL which trade is going to be winning and risk more on it?
am i right in saying that, with fixed fraction MM methods, 1 have to have positive pips(say in a month) to make profit on that month?
thnx in advance
i found this forum very valuable, but somehow forgotten . hope this questions could bring up some light and heat.
kako
0 - I've read many of this forum's(risk and money management) threads. and i've to thank to all contributors.
i've used a tweaked martingale MM method(not the crazy double up on each loss :| ) for a while and i found that many of veteran traders who said: "Martingale MM followers are doomed to lose their whole account sooner or later; it's only a matter of time" are right.
. actually martingale doesn't work because nothing is impossible in the market, even a 15 losing streak(consecutive loss). i've seen it with my two eyes that after 3 yrs, mkt proved me to be wrong in ASSUMING, a 15 losing streak is impossible with my precisely backtested strategy. actually the problem of martingale method is: it assumes dependency between trades, and it's wrong to assume individual trades has any kind of dependency between em.
ok, this was story of losers. let's look for better ways of MM(=money management) which protects the capital in first place. :cheesy:
1- i have to use a Technical or anything else(astronomy maybe) etc ... tool to trade, which supposed to give me an edge in predicting which trades worth taking. then risk a tiny bit of account(say 1% of capital) on every trade(fixed fractional method). the problem is deciding abt n%.
as i read past posts, n% have to be calculated from the max DD(=Drag Down) in the past results in a considerable period. right?
monte carlo simulation is a way of deterimining this ratio right? could u pls provide a practical preferable free tool to do this simulation? or introduce me to formulas of this method to make me enable to apply them in an Excel of VB script.
this was first question of me(monte carlo practical resources for reading/applying it).
ok here's the next:
2- if we have a system with R = (No. Win / No. loss) and W = (Avg.Win / Avg.loss)
am i right in writing this:
E(efficiency of system) = R * W - 1
if we assume trading randomly(based on tossing a coin) in a random mkt with R:R = 1:1 ( say using T/P = 23 pip and S/L = 20 pip. on Eur with 3 pip spread), then E = 0.
am i right or not? this is my second question. i ask this because i've read some other calculations(say kelly's factor) which differs a bit with my calculation.
does E can give a hint to "what Fixed Fraction" (n%) to use?
3- my final question is: is it necessary to have positive Pips in the end of a period to make profit on that period?
i mean some MM gurus say: NO! absolutly not! u have to risk more on winning positions
. ok true. but how could some1 know this special trade is going to be winning? it's kind of assumtion and i think it's not rational. some ppl say check ur trade's set-up with a higher TF(=Time Frame) and if it was in favor of higher TF trend, then risk more on it. i mean is this all which is to Size management? to FEEL which trade is going to be winning and risk more on it?
am i right in saying that, with fixed fraction MM methods, 1 have to have positive pips(say in a month) to make profit on that month?
thnx in advance
i found this forum very valuable, but somehow forgotten
. hope this questions could bring up some light and heat. kako
