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Concerning risk per trade sizing
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Concerning risk per trade sizing

  #81 (permalink)
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I read in my education that that is exactly what the Sm,Hedge funds, and Banks do. Albeit with black box algo. a 2 tick move seems miniscule to some but when the trade has 100 million dollars behind it it's not I don't think.


That's the point my friend. Statistical arbitrage is the domain of the big boys. We are not equipped to compete against them. The further you are out in terms of tenor, the less you compete with the algos and hfts , because your trading will not be as execution intensive. It will also be more scalable because you won'be trading as often, so it won't be as commission intensive.


Last edited by tigertrader; February 25th, 2012 at 07:47 PM.
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Getting stopped out is not a bad thing.

The cost of doing business at that moment and being wrong.

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We are not equipped to compete against them.

I don't CARE why they are doing it. I AM interested in When they are doing so I can get a crumb off the floor. Compete? never. Ride their hand made suit coat tails. Indeed.

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  #84 (permalink)
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I don't CARE why they are doing it. I AM interested in When they are doing so I can get a crumb off the floor. Compete? never. Ride their hand made suit coat tails. Indeed.



Good luck...fool's errand and then some. You will need to be co-located and your software will cost about $20,000 per month to lease, if you want to do algo driven stat arb, plus good luck trying to negotiate goldman's commission structure. Of course, I'm not even speaking to the fact that every possible mis-pricing that temporarily exists is instantaneously exploited, by some algo that was programmed by some russian kid with an IQ of about a zillion.

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  #85 (permalink)
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Didn't mean it that way TT. Just that they can't hide what there doing in the volume. OR can they? I don't know.

Edit: I also understood part of this thread to say that trading size Ie. 10-100 contracts or whatever is the best way to compound $$ of a trade. Most retail traders get jammed up on this the way I understand the economic of it. Not a big enough account balance to trade what they think they can trade. Is this correct? Let alone improper MM.

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I use a little over 1% on entry. As the trade progresses, I may get up to as high at 5%.
On average I'm a little under 2%.

5% when the trade progresses? That means you consider the paper profits as real $ and treat them accordingly or you are adding to the position at certain points?

I am asking because I have bad experience with moving SL (though I still do that - I need to unlearn and accept the risk).
So far I am unable to mix the risk correctly, so the help is welcome.

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  #88 (permalink)
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I see that everyone here has more or less the same kind of position sizing: fixed fractional 1 or 2%, increasing some trades or pyramiding winners.

Has anyone tried / tested / traded some other algorithms ?

- fixed ratio,
- depedancy of the previous trades,
- trading the equity curve,
- leverage space portfolio from Ralph Vince (this guy was claiming on a forum that he was at its 500th winner in a row !)

etc...

Just curious, interesting subject.


I use fixed ratio. Works very well. I like fact as your account grows your risk on a per contract basis decreases. I suggest incorporating position sizing into your backtesting as it will reveal some interesting things.

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  #89 (permalink)
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petrmac View Post
5% when the trade progresses? That means you consider the paper profits as real $ and treat them accordingly or you are adding to the position at certain points?

I am asking because I have bad experience with moving SL (though I still do that - I need to unlearn and accept the risk).
So far I am unable to mix the risk correctly, so the help is welcome.


I don't think he means he's moving his stop in the wrong direction. It's possible to increase risk as you go on side, buy 1 contract with a 4 tick stop, when 4 ticks onside buy another with the same stop, your risk is now 3x your initial risk, but your 1R onside.

In regards to risk/trade. I think that traders who just use x%/trade across all their setups are missing a trick. If you have multiple methods, then it's likely that some have a greater edge than others. So surely they deserve to have greater amounts risked on them (or if you're risk averse, those methods with a lower edge should have less risked on them). I really think that traders don't think enough about risk and just go "1%, I read somewhere that that's a safe amount, that's my MM sorted", everyone I've met who's said that 1% is a good amount, nobody has explained why that particular amount (I'm not saying it's bad, just that many never question it, and that people should).

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Hotch View Post
In regards to risk/trade. I think that traders who just use x%/trade across all their setups are missing a trick. If you have multiple methods, then it's likely that some have a greater edge than others. So surely they deserve to have greater amounts risked on them (or if you're risk averse, those methods with a lower edge should have less risked on them). I really think that traders don't think enough about risk and just go "1%, I read somewhere that that's a safe amount, that's my MM sorted", everyone I've met who's said that 1% is a good amount, nobody has explained why that particular amount (I'm not saying it's bad, just that many never question it, and that people should).

You make a good point. I think every strategy is different and to apply a 1% across the board may not always work. I think every setup must be evaluated by looking at stop to target ratio and what profit that ratio will give relative to draw downs etc. Setting at 1% could be to much or to little depending on how a particular strategy behaves. I typically have very different stops and targets for my shorts and longs for example because they behave differently.

You can go broke losing 1% at a time if your stops are always being hit.

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