It's YOUR Choice

BBB

Experienced member
1,071 3
Here are some methods of managing your money:

A/ A fixed percentage (say 2%) on ALL trades

B/ Start at say 1.5%, after 2-3 consequtive winnining trades, increase by 0.5%. Decrease by 0.5% after 2-3 consequtive losing trades. This allows you to adjust your size for when you are 'in gear' with the market (quick n dirty optimal f type approach)

C/ Risk 1% if the entry signal is only in the intermediate time frame. 1.5% If only in your longer term time frame, 2% if it exists in both time frames.

D/ The nightingale system: If you lose, double you position size on the next trade - hey this losing streak must end soon and I'll make it big when it does!

E/ Pah! MM ain't so important. Trade entry technique is the secret to trading so I'll continue to add to my long position each time a bar makes a new high untill I'm just shy of a margin call!

Which do you prefer?

Do you have any other ideas?

Who thinks D will apeal more to SB traders?

:LOL:
 

damianoakley

Established member
542 57
My personal approach is A.

Except i'd probably go for a slightly more agressive 3% risk.

B and C both have merit, but I personally think that simplicity works best in the markets.

D is for short-term gamblers, not people who want to make a living.

E is false - entry comes 3rd in order of importance after position sizing / money management and state-of-mind.


This of course is all just my opinion - feel free to rip it apart.
 

darrenf

Well-known member
481 3
Currently use A- fixed percentage.

PS I am a spreadbetter but D is certainly very unappealing to me - I think you mean the martingale method?
 

BBB

Experienced member
1,071 3
Yea - sorry you're right it's martingale.

True, simplicity works best.

My preference is C because if I have agreement in multiple time frames, then I can assume that the trade has a higher probability of moving my way - so I can afford a larger size than if I am not as sure.

The key is that I dont think any answers are 'correct', the key is to find what you are happy with. Just like the amount of risk you assume.

Believe it or not, friends of mine who traded futures when the LIFFE floor was open traded with E! But remember - they were closer to the action so could bail at the first sign of trouble. Just goes to show that MM is intertwined with the method you are trading.
 

damianoakley

Established member
542 57
BBB - out of curiosity, what market(s) do you trade? And on what time-frames?
 

BBB

Experienced member
1,071 3
I trade mostly NASDAQ stocks at the mo' but I am considering going back to derivatives (futures).

As for time frame, I dont really have one! I trade what the chart tells me in what ever time frame there is least risk. Most of my analysis is done on the daily chart. If the weekly chart supports the view, I may be holding the position for a few days. If the weekly doesn't support it, but the signal is still strong on the daily chart, then it may be an intraday trade (the daily chart is now my long term time frame).

I will manage the trade on a 15 or 30 min chart during the day. If that trend falters then I take my money and run.

Take today for example. AAPL was looking fine on the daily (the tail /intraday reversal) caught my eye with the stock being in the early stages of an uptrend. Iy could have been good to hold for a few days. The weekly chart wasnt so strong so if I took the trade I'd be looking at an intraday trade with an entry of 21.18. As there is an interest rate announcement at 2:15 EST I figured today wouldnt be so good for an intra day position due to the volatility that it could cause. I am staying out today!

Hope this helps.
 

BBB

Experienced member
1,071 3
Simple $$$$$!

I won't do it though until there is more liquidity on the electronic markets.

I refuse to trade where orders are executed on the floor. This includes NYSE. I'm an ex local and have seen with my own eyes the corruption and theft that goes on to customers accounts. Poor customer just thinks its a bad fill and doesn't even know!
 

Grey1

Senior member
2,186 178
BBB,
Martingale method ( increase pos size afrer a loss, decrease after a win ) and equity curve method ( increase size when equity curve falls below its MA or increase size when you cross above the MA ) DONOT WORK

Reason :-- they assume dependency between trades

Fixed Fractional :-- The problem with this method is risk of each trade is the same, regardless of the number or stocks/ contracts. Also what is the most optimum percentage ...

You can use a ad hoc level of 2% or an Optimal value for each trade ( look at Ralph Vince Portfolio managment Formula or Secure level (look at Leo Zamansky 's Work in TASC ) or Monet carlo simulation by bryant in TASC Feb Issue 2001

There are some other Excellent position sizing techniques you have not mentioned such as margin Plus and Fixed ratio pos sizing

I am using Monecarlo simulation method in my scanner to asses the risk and hence adjust the pos size to make trade less risky compare to historical perferomance of underlying stock/instrument .. Look at the dynamic risk adjusted trade on MR NAZ and CHART Thread for the result..


If you are into academic risk/pos sizing techniques let me know
 
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Grey1

Senior member
2,186 178
look at the MEDI today .. The correct pos sizing depends on the risk levels which dynamicaly is adjusted bar by bar.. Once the risk is determined then the pos size can be choosen to make the trade worth while on the time frame you are trading .. In my case be a 1 minute..

If I was to take the trade as it is now. I would have to have tiny pos size because the risk of going long is 66% with 18C to gain against a loss of 35C..

I would be better off to bet on the black or red in casino in this case would not I ...? Sure I would
 

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damianoakley

Established member
542 57
I would be very interested in talking to you about the position sizing techniques you mention.

The only techniques I really have experience of are the percentage of equity and the percentage volatility techniques.
 

Rognvald

Established member
916 15
Grey 1
I have pm'd for some info but could you explain why equity based position sizing doesnt work - I just don't understand what you mean about dependency between trades (bear of <0 brain)
Thanks
Ron
 

BBB

Experienced member
1,071 3
Thanks Grey1.

I agree - each trade is its own event which is why I'm not such a big fan of the first two.

I use my third example which seems to make sense to me.

What are your thoughts on the RAlph Vince book? I've read some good reviews about it. Some of the ideas I've came across like optimal-f seem to take the concept of a trade as a sequence of random events. This is fine if you trade a mechanical system/use a program to get you in and out of trades aka Thomas Stridsman, but I dont. Thats perhaps why I've stayed away from complex models.

Am I doing myself an injustice then??
 

BBB

Experienced member
1,071 3
Damian -

Good job I didnt go long AAPL today eh!

Grey1 -

Thats some impressive software you have there.
 
 
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