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BlueHorseshoe

Position Sizing or Diversification?

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Just completed a back test on a simple code that reduced available trade equity by 30% next trade if previous trade failed to profit , also added to that, if the second closed trade back failed to produce a profit a further 30% reduction on available equity, from 20k to 14k less loss, lets say to 10k . the result without money management was 19k profit , test 1, 1 negative trade equity reduction resulted to 12k profit and test 2 - multi string loss reduction resulted in a 5k profit , not the way i thought, researching anti martingale. on the flip side , I added shares by 30% on a loss "martingale" , and produced almost 60k in the test. The martingale, similar to averaging down, is outside my donald trump budget and against my buying on the way down. A promising test came from a re invest code that took the equity allotted to that particular symbol and added the profit/loss and divided by the previous bar close verses straight 20k trades over the same period produce 2x the profits. bottom line will be testing the reinvest code over the next 30 days on the 9 xl spyders and will post the results in the traders log, One thought on profit preservation is to step aside when something doesnt add up as i will with the anti martingale for now. further reserch on anti martingale will contine outside of fixed fractional or volatility expansion, would be to add dynamics "push and feel" into the equity reduction.equation. I firmly believe in diversification, yet diversify on leading indicators within each sector. drilldown is the term. cheers

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Suppose you have a limited amount of capital and trade one contract in one market. You're a good trader, and after a certain amount of time you have doubled the account. What's the best thing to do next . . .

 

  1. Increase your position size and trade two contracts?
     
  2. Diversify by trading a single contract in a second market and continuing to trade a single contract in the orignal market?

In other words, if you don't have the luxury of a portfolio sized account to begin with, how do you subsequently reconcile the allocation of capital to secondary markets with position sizing in the first?

 

BlueHorseshoe

 

I'll go with diversification for i'll be giving me even lower risk on a single trade/contract...Risk reduction is the main priority for me, increasing the amount gained from winners comes later.....

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