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Old 10-19-2015, 12:55 PM   #9
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Re: 90% Analysis/10% Money Managment

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Originally Posted by MightyMouse »
The amount you put at risk in a single trade needs to be insignificant to either or both you and the amount of funds you commit to trading.

A really bad day trading should only impact you emotionally; financially, you should not lose >1% of the total funds you commit to trading. Size each trade accordingly. As you approach 1% in loses, stop trading for the day,
I don't know that I've ever used the 1% rule (strictly)... except possibly when I was starting out (it's one of those things that kind of makes sense). Now... I tend to apply the "it's time to head to the house rule". I suppose it comes with experience, but there are some days that you just don't get it, and you are not going to get it. Best to head for the house...

Money management in it's most base form...
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Old 10-19-2015, 02:12 PM   #10
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Re: KIC 8462852: 90% Analysis/10% Money Mgmt

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The most important ‘analysis’ is the one that finds the system that best matches your true nature. If you are trading a system that is not a match with your true nature you are stressing your sympathetically aroused primal structures, mutating them to be LESS adaptive, resilient, ‘tough’ ...and your technique will inevitably gradually and suddenly erode.
True words...

I've come to question as to whether or not I could (would) teach my methods to someone else... the answer is "no". It took me a long time to come up with what I do. It's an amalgam of getting my ass kicked, who I am, and continuously seeking out sound fundamentals. It is something of my own understanding, and I think that (in large part) is why it's successful (for me... in this time and place).

No one ever said this was easy (well, some have said it... I think they were not telling the entire truth).
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Old 10-20-2015, 07:30 AM   #11

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Re: 90% Analysis/10% Money Managment

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Originally Posted by jpennybags »
I don't know that I've ever used the 1% rule (strictly)... except possibly when I was starting out (it's one of those things that kind of makes sense). Now... I tend to apply the "it's time to head to the house rule". I suppose it comes with experience, but there are some days that you just don't get it, and you are not going to get it. Best to head for the house...

Money management in it's most base form...
It's a good rule to help you survive. I risk less than that now and I don't get in and out in a day unless something is really wrong with my "analysis".

It's same as heading for the house. If you get short a few times and there isn't anyone willing to sell lower than you did, then, well you had better go home.

I have no positions at this time. Seems like a lot of chop that I want to avoid in the frame that i am trading.
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Old 10-20-2015, 12:59 PM   #12
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Re: 90% Analysis/10% Money Managment

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Originally Posted by MightyMouse »
It's a good rule to help you survive. I risk less than that now and I don't get in and out in a day unless something is really wrong with my "analysis".

It's same as heading for the house. If you get short a few times and there isn't anyone willing to sell lower than you did, then, well you had better go home.

I have no positions at this time. Seems like a lot of chop that I want to avoid in the frame that i am trading.
To kind of make it back to the "kid" and the OP. It's not often successful to apply axioms to trading. As a for instance: you (mm) are sitting out right now because of the chop... as for me, I revel in the "chop"... I'm geared for chop, and I love it. The days that frustrate me are the days that the market grinds higher. It's a difference in temperament and style.
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Old 10-20-2015, 02:41 PM   #13

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Re: 90% Analysis/10% Money Managment

I dont really like the term "money management", but if you mean adopting some sort of sensible risk management strategy to minimise risk of ruin, and that can be any position sizing method you like really, IMHO money management is pretty much irrelevant

I used to buy into the argument that you optimised MM based on your strategy. It makes some sense, a strategy with a 80% strike rate, and a strategy with a 20% strike rate are going to require a different approach to position sizing, but any kind of specific detail below that is completely irrelevant.

The didtribution in trading returns is pretty much random for most people, and the optimum MM approach during period X is going to differ from the optimum approach in period Y. This inherant randomness in returns kind of makes any MM optimisation pretty much redundant

Its also probably worth pointing out that psychology can often play a part, and you may not actually be able to trade your optimum MM strategy. How many people could trade a sizable account using something like optimal F for example, would you really tolerate a 98% drawdown on an 8 figure account even if its exactly the right thing to do ?
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Old 10-21-2015, 06:26 AM   #14

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Re: 90% Analysis/10% Money Managment

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Originally Posted by zupcon »
I dont really like the term "money management", but if you mean adopting some sort of sensible risk management strategy to minimise risk of ruin, and that can be any position sizing method you like really, IMHO money management is pretty much irrelevant

I used to buy into the argument that you optimised MM based on your strategy. It makes some sense, a strategy with a 80% strike rate, and a strategy with a 20% strike rate are going to require a different approach to position sizing, but any kind of specific detail below that is completely irrelevant.

The didtribution in trading returns is pretty much random for most people, and the optimum MM approach during period X is going to differ from the optimum approach in period Y. This inherant randomness in returns kind of makes any MM optimisation pretty much redundant

Its also probably worth pointing out that psychology can often play a part, and you may not actually be able to trade your optimum MM strategy. How many people could trade a sizable account using something like optimal F for example, would you really tolerate a 98% drawdown on an 8 figure account even if its exactly the right thing to do ?
There is no rational way to recover from a 98% drawdown. Personally, I would have to ignore some rules I have in place and I would have to experience about 100 years of consistent losses to achieve a 98% drawdown. I am 1/2 way to 100 now. I would assume at some point my surviving family members would get power of attorney on my account well before I turned 150 years old.

Anyone who would embark upon a strategy that could experience a 98% drawdown is trying to use the market to solve his problems. Usually that individual ends up solving the markets problem; it's thirst for liquidity.

So the answer is I would not get involved in the first place (98% drawdown).
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Old 10-26-2015, 11:07 AM   #15
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Quote:
Originally Posted by Emily291 »
What do you mean by this? All other things being equal, a larger position size means more risk doesn't it?

To me it seems that position sizing is how we control risk. Often people seem to confuse stop losses with 'managing risk', but that's nonsense - a trader might not use stop losses at all and yet still control risk.
Emily,

Isn’t using position size to “control risk” in effect just a convoluted ‘dollar stop’ ?

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Old 10-27-2015, 03:44 PM   #16
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Re: sizing and 'stays'

Noobs,
The status quo / the ‘voice of trading’ sugar coats it. They would have you apply very general rules to MM (see http://www.traderslaboratory.com/for...tml#post200085 for example)... and mix the "logic" of sizing and ‘stays’, etc etc. An alternative way to look at it is -
‘Stays’ (where to exit / “stop out” in adversity plus where to exit with profits) are best based on individual system stats.
Sizing is best done with portfolio (of systems) level stats.
Ie ‘stays’ levels are best derived from a different set of calculations from the calculations of optimal ‘sizing’ ------- and yes, that’s even if your portfolio of systems is only one system!

... and fwiw, imo your portfolio of systems should never be just one system
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Last edited by zdo; 10-27-2015 at 03:58 PM.
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