ericcse

Hi 1a sir, My previous post was delayed (as a new member) so not sure if you saw it. I am very interested in seeing how you calculate/control the risk in your system. I had spent a lot of time analyzing a similar system, the biggest problem I had was finding an optimal ranges to add to losers -- small ranges = higher exposure to risk, as you need to average down more often. The drawdown can grow very quickly in a strong trend. To address this problem, we can use longer ranges or have a bigger account, however both come with prices. longer ranges means we are missing the smaller moves (small chops), and it goes against our original goal of making small profit as the market moves. Bigger accounts would simply decrease our ROI. So I believe finding the right ranges for the account size is critical here. Really love to see you share an example on how u calculate the ranges in relation to the account size. Also, I am not sure why you would consider yourself having open positions on both directions, is it just for the sake of easy analysis? I analyze it with positions in one direction only, hedging would then just means covering some of my losing positions.

A close friend of mine has been trading a very similar method for 5 years now. Though he doesn't use hedges, just avg down when market goes against him, cover when the market pull back. The main idea is to take advantage of all the smaller moves along with the big move, he called it "dance with the market". Though he recently retreated claiming the potential risk is too big for him to take right now. Can't wait for the next installment, I would love to hear more about how you calculate/control the risk.