Welcome to the Traders Laboratory.

Money Management Risk and money management related topics.

Like Tree7Likes
Reply
Old 03-25-2015, 08:28 PM   #1

Join Date: Mar 2015
Posts: 3
Ignore this user

Thanks: 0
Thanked 0 Times in 0 Posts

90% Analysis/10% Money Managment

Anyone else out there that goes by this?
thekid is offline  
Reply With Quote
Old 06-04-2015, 11:06 PM   #2

Join Date: May 2015
Location: Reno, NV
Posts: 19
Ignore this user

Thanks: 0
Thanked 2 Times in 2 Posts

Re: 90% Analysis/10% Money Managment

100% money management and 10% analysis.
Takes 110% to make it in the trading world.
Emily291 likes this.
EatSleepTrade is offline  
Reply With Quote
Old 10-16-2015, 06:46 AM   #3

Join Date: Oct 2013
Posts: 139
Ignore this user

Thanks: 0
Thanked 1 Time in 1 Post

Re: 90% Analysis/10% Money Managment

Quote:
Originally Posted by thekid »
Anyone else out there that goes by this?
I'd give 50 or even more percent of importance to money management. Many traders lose because of incorrect money management even if their analysis is correct. You may have 5 profitable trades and then take risk and lose everything for one trade even your trading analysis was in 80% correct.
Just my two cents.
fxeconomist is offline  
Reply With Quote
Old 10-16-2015, 01:01 PM   #4
zdo

Join Date: Nov 2007
Location: boonies
Posts: 2,482
Ignore this user

Thanks: 415
Thanked 559 Times in 419 Posts

Re: 90% Analysis/10% Money Managment

Kid,

Explore what you mean by "Money Management". One typically mistake is to subsume / conjoin 'risk management' and 'sizing' under MM and then try to use the very similar processing methods to ascertain both.

It’s system dependent - but generally if you know how to size correctly and if you know how to manage risk correctly then you hardly need ‘analysis’ at all - especially not the common analysis styles promulgated by the ‘voice of trading’. That bold assertion is further strengthened by the reality that for most systems the actual price action following (and trade result of) a signal generated by a high quality 'analysis' may turn out just fine one time and completely different the next... ie for identical signals, the market will invariably give you radically different results.

hth

zdo
zdo is offline  
Reply With Quote
Old 10-16-2015, 02:28 PM   #5
Blocks_2 Champion, Gnome pinball Champion, Collapse Champion, SuperMario Rampage Champion, Arkadium Skeeball Champion, Bozzle Champion, JezzBall Champion, Galaga Space Invaders Champion, Jurassic Pinball Champion, Zulu Gems Champion, Marble Motion Champion, Colour Chain Game Champion, Eye Drops Champion, Blocks Champion, Pinboliada Champion, Block Champion, Bubble Elements Champion, Festival Pinball Champion, Pinball King Champion, Cold Fusion Champion, Mario Kart Extreme! Champion, Crazy PinBall Champion, 7up Pinball Champion, National Treasure Pinball Champion, Cloud Breakout Champion, Crystal Island Champion, HotRod Pinball Champion, Zuma Kowloon Champion, Skee Ball Champion, Bomb Jack Champion, Blocks 2 Champion, Pepsi Max Pinball Champion, Dynomite Champion

jpennybags's Avatar

Join Date: Jun 2011
Location: Kansas
Posts: 428
Ignore this user

Thanks: 139
Thanked 70 Times in 64 Posts

Re: 90% Analysis/10% Money Managment

The kid...

As zdo has pointed out... it is all system specific...

Not to get too deep in the weeds, but throughout my trading day, I'm constantly in a state of analysis (even when I'm in a trade). I will often take trades that I consider to be of higher initial risk than other trades (an assessment that goes on in my simple, and often flawed mind). I do this because (1) I'm skilled, and (2) you have to have money "on" to make money (risk). From that moment, I rely on trade management to control risk (again constant analysis). For me and my style of trading "trade management " is "risk management"... the two are not separable.

As to the term "money management", my position size is always the same. I trade on a very short time frame. For someone who trades on a longer time frame, scaling in and out of trades may make sense (there again; you are controlling risk... initial risk and tail end risk). If you have deep pockets, and are willing to take on the risk, then money management takes on a greater importance. For me "money management" doesn't really come in to play.

In the end it all comes down to controlling risk... and it is system specific. For me it's 100% analysis... every day, during the entire session.
jpennybags is offline  
Reply With Quote
Old 10-19-2015, 08:36 AM   #6

MightyMouse's Avatar

Join Date: Jan 2008
Location: The Lumber Yard
Posts: 2,333
Ignore this user

Thanks: 82
Thanked 599 Times in 444 Posts

Re: 90% Analysis/10% Money Managment

Kid,

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.

The above is just an example.

It is different if you are a long term trader/investor with multiple positions, but you are a day trader when you first enter a long term trade. With any trade you enter, long term or short term, long or short, start chopping the size of the trade if it gets red right away. You can always reenter lower or higher at a better or worse price.

Analysis Snalysis. It makes no difference which system you design. Eventually, any and every system will produce something. If so, then money management is nearly 100% of trading. You risk of ruin needs to be zero. If it is not, then eventually, you will get caught with your pants down. There are a lot of brilliant, knowledgeable traders who are broke, because the market did either what it shouldn't have done or what it had never done before.
zdo and jpennybags like this.
MightyMouse is offline  
Reply With Quote
Old 10-19-2015, 10:05 AM   #7

Join Date: Sep 2015
Posts: 13
Ignore this user

Thanks: 4
Thanked 1 Time in 1 Post

Re: 90% Analysis/10% Money Managment

Quote:
Originally Posted by zdo »
One typically mistake is to subsume / conjoin 'risk management' and 'sizing' under MM and then try to use the very similar processing methods to ascertain both.

zdo
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.
Emily291 is offline  
Reply With Quote
Old 10-19-2015, 01:33 PM   #8
zdo

Join Date: Nov 2007
Location: boonies
Posts: 2,482
Ignore this user

Thanks: 415
Thanked 559 Times in 419 Posts

KIC 8462852: 90% Analysis/10% Money Mgmt

MM succinctly said what I was basically trying to say ...
However, I will add to his “The above is just an example.” -
That 1% rule is basically a lazy beginner trick... ie if you continue to use that 1% rule, you’re sizing and risk management will be about as effective MM as is simple moving average signaling effective 'analysis' in the long term...both is looser  !
ie You need to engineer and fine tune your risk and sizing methods to your individual system(s) ... just like fuel injection,etc. need to be engineered and fine tuned to the engine it’s on top of, etc...


...



In my earlier post I encouraged Kid to explore what he meant by Money Management.
Now it’s time to encourage an exploration of what he meant by Analysis.
Typically Analysis is ‘entry’ dominant... yada yada the analysis born of the ‘voice of trading’ propaganda etc etc
BUT
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.
The below is just an example
Someone manually trading a system that has some level of entry signal ‘ambivalence’ who is not suited to trading a system that has that level of entry signal ‘ambivalence’ will ultimately find a way to be a ‘dropout’ from the system. For an example from an otherwise perfectly fine method - most of the variable signal ambivalence in DBP’s SLTAMT is sourced in the individuals’ brains, not in the method itself.
Some students will simply encounter less signal ambivalence than others.
AND
Some students will be able to handle more signal ambivalence than others
Those who can’t handle a certain threshold of both will comprise a large percentage of the method’s ‘dropouts’ / failures

This means not making the typical beginner mistake of exploring/flirting with analysis / systems in isolation.
AND
This doesn’t mean means exploring your self in isolation.
It means exploring your self and systems in parallel... not easy...
jpennybags likes this.

Last edited by zdo; 10-19-2015 at 02:52 PM. Reason: it was fkt up
zdo is offline  
Reply With Quote

Reply

Thread Tools
Display Modes Help Others By Rating This Thread
Help Others By Rating This Thread:

Similar Threads
Thread Thread Starter Forum Replies Last Post
Follow the Smart Money / COT Analysis Dunstan Futures Trading Laboratory 223 Yesterday 07:30 AM
What Should I Start with - Technical Analysis or Fundamental Analysis? phaynes1985 Beginners Forum 5 09-23-2014 10:58 AM
Are You Favor Fundamental Analysis or Technical Analysis? I Have Another One…. wmck6167 Trading Psychology 14 06-17-2013 05:50 AM
Fiat Money Tradewinds General Discussion 32 01-25-2013 11:59 AM
If You Didn't Need the Money Would You Still Trade? TradeRunner General Discussion 32 11-15-2012 12:35 PM

All times are GMT -4. The time now is 02:26 PM.
Copyright ©2000 - 2017, Jelsoft Enterprises Ltd.
CS to VB integration by DeskLancer
©2006-2011 Traders Laboratory, All Rights Reserved.