Which Risk Management approach is "best"? - Psychology and Money Management | futures io social day trading
futures io futures trading


Which Risk Management approach is "best"?
Updated: Views / Replies:2,010 / 16
Created: by keymoo Attachments:1

Welcome to futures io.

(If you already have an account, login at the top of the page)

futures io is the largest futures trading community on the planet, with over 90,000 members. At futures io, our goal has always been and always will be to create a friendly, positive, forward-thinking community where members can openly share and discuss everything the world of trading has to offer. The community is one of the friendliest you will find on any subject, with members going out of their way to help others. Some of the primary differences between futures io and other trading sites revolve around the standards of our community. Those standards include a code of conduct for our members, as well as extremely high standards that govern which partners we do business with, and which products or services we recommend to our members.

At futures io, our focus is on quality education. No hype, gimmicks, or secret sauce. The truth is: trading is hard. To succeed, you need to surround yourself with the right support system, educational content, and trading mentors Ė all of which you can find on futures io, utilizing our social trading environment.

With futures io, you can find honest trading reviews on brokers, trading rooms, indicator packages, trading strategies, and much more. Our trading review process is highly moderated to ensure that only genuine users are allowed, so you donít need to worry about fake reviews.

We are fundamentally different than most other trading sites:
  • We are here to help. Just let us know what you need.
  • We work extremely hard to keep things positive in our community.
  • We do not tolerate rude behavior, trolling, or vendors advertising in posts.
  • We firmly believe in and encourage sharing. The holy grail is within you, we can help you find it.
  • We expect our members to participate and become a part of the community. Help yourself by helping others.

You'll need to register in order to view the content of the threads and start contributing to our community.  It's free and simple.

-- Big Mike, Site Administrator

Reply
 1  
 
Thread Tools Search this Thread
 

Which Risk Management approach is "best"?

  #11 (permalink)
Elite Member
In the heat
 
Futures Experience: None
Platform: NT
Favorite Futures: Energy
 
PandaWarrior's Avatar
 
Posts: 3,155 since Mar 2010
Thanks: 6,306 given, 13,250 received


keymoo View Post
Thanks for the replies.

I am leaning towards either:

Scale-in, All out (when I mean scale in, I mean only add positions when market is going in your favour, not average down)

or

All in, scale out

And possibly even consider tailoring the risk management strategy for the conditions. For example in a quiet trading range, enter on limit orders and go all-in all-out with tight stops and targets. In a trend, possibly scale-in on pullbacks and then get out all at once when there's a strong reversal signal.

I am attracted to the scale-in, all out approach because it means that losers will be small if the initial position is wrong. But then it could be psychologically difficult to add a position and give yourself a worse average price.

Hmm, I guess what I'll have to do is try various styles and find one that works for me.

Read this...I think you will find something that resonates with you. I too am on this journey...the scale in approach is beginning to really makes sense....read this and see if you agree.

Simplicity is the ultimate sophistication, Leonardo da Vinci


Most people chose unhappiness over uncertainty, Tim Ferris
Attached Thumbnails
Which Risk Management approach is "best"?-phantom-pits.pdf  
Reply With Quote
The following 5 users say Thank You to PandaWarrior for this post:
 
  #12 (permalink)
Elite Member
Las Vegas, NV
 
Futures Experience: None
Platform: NinjaTrader
Broker/Data: NinjaTrader Brokerage
Favorite Futures: CL
 
Posts: 102 since Jun 2010
Thanks: 115 given, 103 received

I whole heartedly agree with this, because it WORKS FOR ME.
I used to set trail stops (so many ticks behind current price, etc..).
This chopped my account up in tiny pieces, only to see price action go in my direction.

My friends asked me, "whats your stop?"
I always replied, "I don't use a stop. I enter a trade with no stop (naked trade), and once price action indicated that the move might be exhausted, I then drop a 'stop' on my NT chart-trader."
Dangerous? Actually safer for me.
I let the chart tell me when I should "drop" my "stop."
I find the proper charting time frame for my personality, enter a position with no hard target and no trail stop or hard stop.
I then "drop" a "stop" on my chart trader.

If I win, then I move on to the next.
If I lost, I did nothing wrong and trusted my technique, and then I move on to the next.

Once I STARTED to TRUST my technique/method/chart, there was NO need for a set trail stop or hard stop.

This works for me, and it may or may not work for you....



Big Mike View Post
There is no right answer that applies to you.

You have to find the method that works best for you, your style, your method, your personality, your risk aversion, your thrill seeking, etc.

You have already compiled a list of the popular methods, so unless you are not understanding how they work, I am afraid that you are really on your own here. You have to use trial and error and find the one that "speaks to you".

I would not place much emphasis on what others say works for them in this regard, because it is just too "personal" meaning it is what works for them and we are not all the same. Better to find what works for you.

Only comment I have about your list is the trailing stop and breakeven after a certain move in the market. I caution against any of these kinds of trailing stops.

Your entry is a function of the market price action, yes? Your exit, the same, yes? Why would your trailing stop be based on something that has to do with your account size? You are trading the market. You are not trading "your account size". While risk is extremely crucial in determining position sizing, I do not believe a stop (of any kind) should be a function of account size. Rather, stop is a function of the market price action, and then you must scale your position to conform with your account size (ie: not risking more than 1%).

Don't make the mistake of entering a trade and setting a stop blindly based on how much you are willing to lose. Market doesn't care about that. Set a stop where your signal is no longer valid.

Don't move your stop up (trail) during a trade for the same bad reasons. A stop should be moved up if you have a reason based on market action to do so.

No doubt, it is much harder to master this. And I think it is fine for beginners to use trailing stops to help them along, but you should break away from this as soon as possible, because using such an arbitrary trailing stop is going to hurt you far more than help you. For example, you will get taken out of a trade and find yourself thinking "This trade is still valid, why am I flat?"

Mike


Reply With Quote
 
  #13 (permalink)
Elite Member
Bedford, UK
 
Futures Experience: Beginner
Platform: SierraChart/TT Feed
Favorite Futures: NQ
 
keymoo's Avatar
 
Posts: 129 since Mar 2012
Thanks: 212 given, 204 received



Big Mike View Post
What I meant is that I see people constantly looking for a shortcut. The desired effect of this shortcut is to trade better.

I understand the search, but I think it is the wrong path. A golfer might constantly look for better clubs, better balls, better gloves, shoes, etc... but none of those things are going to improve the score when the golfer can't control his temper, loses control, doesn't follow his rules, etc.

Searching for the "right parameters" of a trailing stop, indicator or ATM or otherwise, is a move down this wrong path in my opinion.

Thanks for taking the time to reply to my thread Mike, but the tone of your post is very condescending, "parental" and at best, vague. In the seminar FT71 said that the risk management strategy a trader chooses will have a dramatic effect on their trading. Choosing a risk management model appropriate for the trader and spending time researching risk management models is a completely different (and valuable) way of spending one's time compared to tweaking indicator settings. I don't use indicators in case you're interested. Can we bring this thread back on topic?

Anyway, either everyone is on holiday or people don't have much useful input on this, in my opinion, important topic.

Reply With Quote
 
  #14 (permalink)
Elite Member
Bedford, UK
 
Futures Experience: Beginner
Platform: SierraChart/TT Feed
Favorite Futures: NQ
 
keymoo's Avatar
 
Posts: 129 since Mar 2012
Thanks: 212 given, 204 received


PandaWarrior View Post
Read this...I think you will find something that resonates with you. I too am on this journey...the scale in approach is beginning to really makes sense....read this and see if you agree.

Ah yes the phantom of the pits. I read this years ago, and certainly deserves another read. Thanks.

Reply With Quote
 
  #15 (permalink)
Elite Member
New York, NY
 
Futures Experience: Intermediate
Platform: Sierra Chart, thinkorswim
Broker/Data: Amp-Rithmic/TT, IB
Favorite Futures: CL, GC, NQ
 
Posts: 569 since Nov 2010
Thanks: 1,797 given, 249 received

keymoo, how did your search on this topic go?

Reply With Quote
 
  #16 (permalink)
Elite Member
Bedford, UK
 
Futures Experience: Beginner
Platform: SierraChart/TT Feed
Favorite Futures: NQ
 
keymoo's Avatar
 
Posts: 129 since Mar 2012
Thanks: 212 given, 204 received

I have spent a considerable amount of time thinking about this and testing it. I have come up with a system to suit myself, which may or may not suit others, and will probably evolve as my trading experience grows. I am currently trading a reasonably fast timeframe, a 5min chart and I sometimes flip to a 1000 tick on the NQ depending on market conditions.

My approach is based on what the market is currently doing. I will generally have three styles and will use one of them based on my judgement of the market during the first 15-30 minutes from the regular open and the previous day's action.

1) If I think the market is trending I will look for PBs to get in with the trend and will scale in as much as possible. When it is time to add the next position, if the stop of that position means that the first position is at BE or slightly worse, then I will add and put the stop of the entire position at the same place. I will do the same for any further adds. I will take all of the position off at a logical exit point, such as a measured move, a risk multiple target or other S/R level or strong exit signal (for example a strong entry signal in the opposite direction to my position).

2) If I think the market is in a trading range, then I will take 1R trades and go all-in and all-out at a 1R limit order target with no trailing stop. I will move to breakeven if the market flirts with my target but doesn't fill it.

3) If the market is in a volatile trading range, then I may go for 2R trades and go all-in and with a 2R limit order target but with a trailing stop to breakeven once the market has reached 1R. I may take off half the position at 1R depending on conditions, but I generally try to hold.

I'm still a newbie to trading, so take what I say with a pinch of salt.

Reply With Quote
The following 2 users say Thank You to keymoo for this post:
 
  #17 (permalink)
Elite Member
New York, NY
 
Futures Experience: Intermediate
Platform: Sierra Chart, thinkorswim
Broker/Data: Amp-Rithmic/TT, IB
Favorite Futures: CL, GC, NQ
 
Posts: 569 since Nov 2010
Thanks: 1,797 given, 249 received


keymoo View Post
I have spent a considerable amount of time thinking about this and testing it. I have come up with a system to suit myself, which may or may not suit others, and will probably evolve as my trading experience grows. I am currently trading a reasonably fast timeframe, a 5min chart and I sometimes flip to a 1000 tick on the NQ depending on market conditions.

Thanks for the update, I would love to hear more about your testing and the results of it, and how/why you came to choose these methods you mentioned.

Also, did you find overall you did better taking trades off at a set target rather than with trailing stops?

And, on the trades where you are scaling in, are you building up to your normal full position/1R, or are you adding your full position/1R with each add?

What kind of frequency are you trading these methods with? Would you mind sharing the performance statistics you are getting with each method?


Last edited by Futures Operator; September 25th, 2012 at 10:33 PM.
Reply With Quote

Reply



futures io > > > Which Risk Management approach is "best"?

Thread Tools Search this Thread
Search this Thread:

Advanced Search



Upcoming Webinars and Events (4:30PM ET unless noted)

Jigsaw Trading: TBA

Elite only

FuturesTrader71: TBA

Elite only

NinjaTrader: TBA

Jan 18

RandBots: TBA

Jan 23

GFF Brokers & CME Group: Futures & Bitcoin

Elite only

Adam Grimes: TBA

Elite only

Ran Aroussi: TBA

Elite only
     

Similar Threads
Thread Thread Starter Forum Replies Last Post
An "Austrian View" Approach To Equity Prices Quick Summary News and Current Events 0 December 23rd, 2011 07:40 PM
Bill Gross' Response To The Euro Summit: "Hard To Trust; Risk Off" Quick Summary News and Current Events 0 December 9th, 2011 12:20 PM
Fukushima: "China Syndrome Is Inevitable" ... "Huge Steam Explosions", or "Nuclear Bo Quick Summary News and Current Events 0 November 22nd, 2011 02:50 AM
How to change "Stop Loss" and "Take Profit" in "shElderImpulse" Strategy javed759 NinjaTrader 1 November 1st, 2011 11:44 PM
"mid", "buy", "sell" volumes lokgotkent Traders Hideout 6 September 30th, 2011 02:24 PM


All times are GMT -4. The time now is 01:06 PM.

Copyright © 2017 by futures io, s.a., Av Ricardo J. Alfaro, Century Tower, Panama, +507 833-9432, info@futures.io
All information is for educational use only and is not investment advice.
There is a substantial risk of loss in trading commodity futures, stocks, options and foreign exchange products. Past performance is not indicative of future results.
no new posts
Page generated 2017-12-16 in 0.13 seconds with 20 queries on phoenix via your IP 54.91.38.173