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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."
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."
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.
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."
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)
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
