No sweat, I was going to actually buy them, but I need to wait another week or so. I just purchased something else from another vendor and what can I say, I have a budget. I will say this about the vendor: I inquired on Sunday and I got the answers I needed via phone and e-mail that day; I like good, quickj service, I think it is a good sign. It sounds like they have really strong support also.
Last edited by Rayzor; June 30th, 2011 at 08:24 AM.
Reason: add comment
I don't think this approach is forcing you to improve your trading skills, it is insuring that you don't reach your point of ruin to quickly. But I think the only thing that will improve your discretionary trading is screen time. To that extent , the approach will help, as it will allow to extend your screen time as much as possible.
I believe that successful discretionary traders have an inherent aptitude for it that is developed and tuned by screen time. So, the 90% of discretionary traders that fail, either do not have that inherent aptitude, or reach the point of ruin before they develop that aptitude into a skill, or did not have the patience or perseverance to clock in the screen time.
The following user says Thank You to monpere for this post:
Thank to everyone for their input. I've modelling my money management system and have some things to share. As posters have said on this thread (and many others), risk control can't make profits, only a profitable trading system can do that. I fully understand and agree. All I am trying to do is give myself the best chance of success by staying in the game.
So what's new.
I have taken the results of a backtest (manual, candle by candle) on one of my systems. Top line is an accuracy rate of 52% and payoff of 1.959:1. This is an 118 trade sample covering 7 months made up from 2 pairs: EURUSD and GBPJPY.
I have tweaked the system to be more aggresive, the risk range per trade is between 0-5%; and it's more reactive, sampling the last 10 trades rather than the last 20.
With a straight 1% risk with all profits reinvested to the trading account return is:
So what benefits are there for the extra bother? Firstly I feel more 'protected' as I know if my performance falls I continue to trade without getting too strung out with the $ losses. I can just continue to take each trade as it comes.
Another benefit is dealing with a run of losses. I ran a monte carlo simulation on this system and there is 5% chance of experiencing a run of 10 losses. At 3% that would equate to 30% account drawdown and put me dangerously close to my pull the plug figure of 35%. Even at 2% this would knock the stuffing out of the account and me. In theory I can have an unlimited run of losses and still be 'in the game'. Reality would be that I would probably realise I was not going to make it (or that system was not going to make it) and decide to stop trading - rather than run out of money first and have to stop.
I'll continue to post up any developments and data on trades. I accept this system may look like unnecessary complexity, but it feels right for me and I have found that I can fully concentrate on following my trading rules / executions and I do not think about the money all that often.
1. I trade down to microlot level, the added granularity ensures I match % with actual money as closely as possible.
-not very important
2. I also have some circuit breakers which stop me over trading, revenge trading etc. (I've learn't that tomorrow there will be a whole heap of new opportunities and the market doesn't care if I do domething else):
- 3 losing trades in a row or losses of $XXX stop trading for the day
- 3 losing days in a row or lossess of $XXX stop trading for the week
- Over $XXX profit in a day stop trading
- Over $XXX profit in a week stop trading
- Over $XXX profit in a month stop trading
- If I suffer a 10% drawdown or 7 losing trades in a row I reduce risk to 0.5% (if it is higher than that at that point)
- At 20% drawdown or 25 trades producing a net loss revert to demo trading (if not doing so at that point). And then return 2 sets of 7 trades with a net profit on each to revert to live trading.
-your circuit breaker is your personal managemt. Discipline.
3. I have no more than 4 trades open at any time (unlikely due to correlation rules)
-Time frame? if you're hyper scalping, its much tougher than trading off weekly charts
4. No more than 3 times the current risk % at risk at any one time (any trade with a stop past breakeven not included).
-keep it simple
5. Capital allocation. At the end of each month I add or withdraw money to/from the trading account. I add if I've made a profit in the month, the same amount that I made. Withdraw in a losing month in the same manner.
-withdrawing money is a whole psychological deal in itself.
6. At 35% drawdown I stop trading and get a job.
-get another source(s) of income right now. Trading is much easier when you don't care about the money you lose. It's not a coincidence that many successful people have several businesses.
The following user says Thank You to lsubeano for this post:
Some say that Money Management is 90% of the game. I tend to agree, and it's excellent that your focus is on this sooner than later.
Strong recommend for The Trading Game. I have the PDF, if you like. It's all about Money Management and the author keeps it clear and relatively simple.
Since you're doing Forex, you might be interested in ForexDecoder (PM me for the link. I'm not allowed to post URLs yet..... or Google "ddsmm" and choose the first find) for the free spreadsheet and video. In it he shows how, using his spreadsheet and recommend lot sizes per trade, you can have 30 winners followed by 30 losers, with a net gain of ZERO PIPS and still have very significant profits to show for that effort.
Hope that is of some help,
The following user says Thank You to MerlinBrasil for this post:
Thought I'd bump my own thread for the sake of an update.
10 months or so later and the money management - in retrospect - did it's job. The main goal of having (a complicated) approach was to keep me in the game whilst I was finding my way. And it did just that. After trying countless chairs I found one in which I am comfortable and profitable. And it is absolutle not the type of trading I thought would suit me when I started out.
My worst drawdown during the learning curve (ok, the first of my learning curves!) was 4% of my starting equity.
I no longer use the plan as stated as part of my development was to track all sources of error (anyone undertaken a 'lean process' in the muggle world?) and I identified so many were coming from dumb human error. So I learned C# and have coded all my strategies - including an amended money management.
I still invest much more time in analysing and developing protective measures rather than the entry/exits strategies themselves, which are far from stellar but reliable! I honestly get a bigger kick from ending a bad day with the least loss, rather than than a good day day with the greatest gain. There will be countless good days to come - but irrelevant to me if I'm not in the game.
The following 2 users say Thank You to mokodo for this post: