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Best Money Management Strategy
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Created: by Nasdin94 Attachments:3

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Best Money Management Strategy

  #11 (permalink)
Elite Member
Austin, TX
 
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liquidcci's Avatar
 
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I use fixed ratio and it works well. I can't necessarily say it is or is not the best method but it is my favored and fits well with what I do. The best characteristic of fixed ratio is as your contract # goes higher the amount of capital allocated on a per contract basis increases. So essentially the system becomes less risky when you have the most at risk. I like it because especially when using leverage like most of us do in the futures market I want to protect my gains and have more padding at higher contract levels.

"The day I became a winning trader was the day it became boring. Daily losses no longer bother me and daily wins no longer excited me. Took years of pain and busting a few accounts before finally got my mind right. I survived the darkness within and now just chillax and let my black box do the work."

Last edited by liquidcci; August 15th, 2012 at 12:31 PM.
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  #12 (permalink)
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Seattle Wa
 
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liquidcci View Post
I use fixed ratio and it works well. I can't necessarily say it is or is not the best method but it is my favored and fits well with what I do. The best characteristic of fixed ratio is as your contract # goes higher the amount of capital allocated on a per contract basis increases. So essentially the system becomes less risky when you have the most at risk. I like it because especially when using leverage like most of us do in the futures market I want to protect my gains and have more padding at higher contract levels.

I was wondering what increment you have found best to increase size when trading ES? I feel now that my trading has improved enough and I have a small edge and I would like to maximize this. Any insight you have would be appreciated.

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  #13 (permalink)
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Piston36 View Post
I was wondering what increment you have found best to increase size when trading ES? I feel now that my trading has improved enough and I have a small edge and I would like to maximize this. Any insight you have would be appreciated.


The best way to do that is run your backtest or forward tests through a program like Market System Analyzer. You can then see how the different deltas work on your system. Each system is different so the deltas are usually different. I trade multiple strats on multiple markets and I use different deltas on each. But I did not just blind decide what to use I ran my data through the paces. I cannot emphasize enough how important it is to approach in this way.

"The day I became a winning trader was the day it became boring. Daily losses no longer bother me and daily wins no longer excited me. Took years of pain and busting a few accounts before finally got my mind right. I survived the darkness within and now just chillax and let my black box do the work."
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  #14 (permalink)
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Reminds me of my oldest son, whom I love dearly but who once showed me a spreadsheet with a formula for doubling his money in the markets every 2 weeks. The good news is he's on a management track with his company. The bad news is I still need to convince him he's capable of executive track. Only way I know to survive one's misconceptions: someone else's money.

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  #15 (permalink)
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liquidcci View Post
The best way to do that is run your backtest or forward tests through a program like Market System Analyzer. You can then see how the different deltas work on your system. Each system is different so the deltas are usually different. I trade multiple strats on multiple markets and I use different deltas on each. But I did not just blind decide what to use I ran my data through the paces. I cannot emphasize enough how important it is to approach in this way.

Thanks I was wondering how to do that since my trades are discretionary. Looks like with that MSA I can input past trade data and work towards optimizing my trade size.

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  #16 (permalink)
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Piston36 View Post
Thanks I was wondering how to do that since my trades are discretionary. Looks like with that MSA I can input past trade data and work towards optimizing my trade size.

It is very hard to this kind of thing with discretionary because using discretion in a pure sense your probabilities are always changing. What you did last week could be completely different than what you did the week before etc so makes it hard to measure things... The more consistency you have by following rules the easier it is to measure and logically increase size in my opinion.

"The day I became a winning trader was the day it became boring. Daily losses no longer bother me and daily wins no longer excited me. Took years of pain and busting a few accounts before finally got my mind right. I survived the darkness within and now just chillax and let my black box do the work."
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  #17 (permalink)
Trading Apprentice
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Fixed Ratio vs. Fixed Fractional


Nasdin94 View Post
THE LOGIC BEHIND THE FIXED RATIO METHOD

I realize some of you may be saying that a fixed fraction and a fixed ratio are the same thing. But, in fact, they are referring to two different subject matters.and that is the difference. The fixed fractional method is referring to what percentage of your capital should you risk on the next trade, and every trade thereafter. The Fixed Ratio method is referring to difference between each increase and decrease. This is the key.

Trying to really understand the difference here. Can someone elaborate on:

"The fixed fractional method is referring to what percentage of your capital should you risk on the next trade, and every trade thereafter. The Fixed Ratio method is referring to difference between each increase and decrease. This is the key."

I know how fixed fractional works, but did not completely understand the fixed ratio method. Maybe someone can give me examples on how a trade size is going to be determined by this method (maybe with particular examples)

thx

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  #18 (permalink)
Sienna
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I am in the same position as sagetrade (hoping someone could post actual examples), thanks in advance

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  #19 (permalink)
Sienna
Melbourne, Australia
 
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Nasdin94 View Post
I have attached the excel spreadsheet.

You can adjust the top rows to fit into your liking accordingly.

Everything is done for you below, including the capital required before you start trading with 0.1 lots.


And it would also be nice to have those little "Star" things on my thread and it would also be nice to have those "Thanks" on my posts.

Hi Nasdin94
This thread is quite old, so hoping you will check it. On your terrific Excel spread sheet (thanks!) at the top Column B1 and B2: What does MM stand for?
thank you

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  #20 (permalink)
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Hello,

It's been 2 years, I've made some improvements on my excel, let me see what I said first that past 2 years and recap.

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