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Big Mike's simple money management rules
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Big Mike's simple money management rules

  #11 (permalink)
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Hi Mike,

Quick question about moving stops to b/e. Do folks do this to give the trade 'room' to move in their favour?

I ask because to me the entry price isn't b/e with the cost of the trade. I tend to move mine to +1 tick as a result, sometimes I get stopped out, but then again I didn't pay for the trade.

Too conservative?

Cheers,

MDM.

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  #12 (permalink)
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Moondialman View Post
Hi Mike,

Quick question about moving stops to b/e. Do folks do this to give the trade 'room' to move in their favour?

I ask because to me the entry price isn't b/e with the cost of the trade. I tend to move mine to +1 tick as a result, sometimes I get stopped out, but then again I didn't pay for the trade.

Too conservative?

Cheers,

MDM.

I do it so I don't turn a winner into a loser. It's more important to make money than to be "right", so holding out for that last tick or two on your target while leaving your stop alone doesn't make sense to me.

I agree, moving it to entry does not truly mean "break even" due to commissions. However, I use a different approach than most with this, I view commissions, data feed, my computer, platform, etc etc etc as costs of doing business and I account for these costs but do not bundle it in on each trade.

Mike

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  #13 (permalink)
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Hi Mike,

Thanks for clarifying, that makes more sense now.

I hadn't considered the option of bundling costs like that, it's interesting, will have a think about that for my 'Plan'.

Cheers,

MDM

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  #14 (permalink)
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"For me, my motto is to never turn a winner into a loser. My money management is built around this goal."

Thanks Big Mike! This is one rule I need to be reminded of often.

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  #15 (permalink)
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Hmm, an old thread. I've changed some of my views since this thread was created, for instance I include commissions now in my net profit per trade but still exclude data feeds and platform charges.

Mike

Due to time constraints, please do not PM me if your question can be resolved or answered on the forum.

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4) Accept responsibility for your actions. Stop looking elsewhere to explain away poor performance.
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  #16 (permalink)
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Big Mike View Post
I've changed some of my views since this thread was created...

Me too : I used to think that trading in multiples of 3 was optimal; then 4 (2 off @ 1:1 RR to "buy one's risk", 1 fixed target, 1 trail), but having spent last week on my annual ski vacation, gazing at the serene Alpine landscape & breathing that wonderful mountain air (clears the mind), sipping an Irish coffee every lunchtime (clouds the mind back up again), I am now attempting to approach this issue from a different angle.

This is what I propose :

2% account risk per trade;
Full winner = or > 2x full loser;
Goal to have at least 25% full winners and no more than 25% full losers, remaining 50% approx b/e (ie. a collection of small losers and trades that perhaps hit T1 then went back to b/e etc).

Sounds very achievable, doesn't it, but I think it will be VERY tough to change the conditioning of grabbing that early profit (+8 ticks for me on FDAX) ? There is an excellent post by cbratton which I think is in the Al Brooks thread that I found very inspiring in this regard.

So, say 40 trades / month (just two per morning)
10 x 2R = 20R
10 x -1R = -10R
20 x 0R = 0R

Total 10R pm

10R per month when R = 2% = 20 % ROA per month. Calc excludes comms for simplicity. Btw, I am accustomed to much higher win rates, so I hope the average trade, and therefore expectancy, will be considerably higher (but prior higher win rates also included very small winners).

What I am seeking is greater consistency of returns and whilst this is not only predicated by money and trade management, it is a very central part of the picture.

To implement the above, I am reviewing my entire day trading structrue, entries, exits and especially trade management (when to move stop to b/e and trail distance are very critical).

J.

Edit - I found the relevant para from cbratton's post :


Quoting 
On the profit targets, you must force yourself to be patient to wait for the targets to be hit, no panic or fear to take a small gain, because if you have small gains and small losses you will lose money or not make very much. Almost everyday I have +20 ticks in the profit on a trade and then the market reverses and I end with a 5 tick loss. So I ask myself why I don't go for a smaller profit, but I know if I did that then I would be like most people and then lose money. Also my R/R would be lower and I would have to be right more of the time. You must be patient, must have discipline to follow your plan. Before I became profitable I always went for a small target lets say 5-10 ticks, I was happy that I actually made money, then I had a couple of losses, even small losses it still hurt enough to turn the net profits into net losses. I think someone is always tempted to make the profit targets smaller and stops larger, when one should make there profit target larger and stops smaller.



Last edited by jtrade; March 2nd, 2011 at 11:53 AM.
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  #17 (permalink)
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Mike

When I get in a trade I have a actual, physical target in mind. (S/R based)

At times, when price starts moving and breaks through a threshold and the trade is on, I will
place my stop below the PA. This usually leaves a stop that is larger than my target.

I can't stand to have my stop "in the battle zone" per se....


With my testing in TF this doesn't seem to be a problem yet, but I always say to myself
"Man this RR sucks"

I seem to be pretty good at judging these smallish targets, so my stops rarely get hit...
I average about a 1.5:1


I can't find any way around it. I don't like having to depend on a 15 tick target to offset my 15 tick stop.


This should be alright if I can stay above 75% winners don't you think??


AJ
Nashville, Tennessee


"Life On The Edge of SR"
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  #18 (permalink)
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Hey mike, no offense, but aren't we mixing "money management" with "Entry/Exit rule" here???

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  #19 (permalink)
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tderrick View Post
Mike

When I get in a trade I have a actual, physical target in mind. (S/R based)

This should be alright if I can stay above 75% winners don't you think??

Well, if you are willing to take unlimited risk at 95% winning rate you still have a potential of once having 3 losing days in a row that wipes out 60% of your account ... hmmm ...

OUCH

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  #20 (permalink)
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tderrick View Post
Mike

When I get in a trade I have a actual, physical target in mind. (S/R based)

At times, when price starts moving and breaks through a threshold and the trade is on, I will
place my stop below the PA. This usually leaves a stop that is larger than my target.

I can't stand to have my stop "in the battle zone" per se....


With my testing in TF this doesn't seem to be a problem yet, but I always say to myself
"Man this RR sucks"

I seem to be pretty good at judging these smallish targets, so my stops rarely get hit...
I average about a 1.5:1


I can't find any way around it. I don't like having to depend on a 15 tick target to offset my 15 tick stop.


This should be alright if I can stay above 75% winners don't you think??


I have since modified the thinking mentioned above and come in line with a more conservative stance...


AJ
Nashville, Tennessee


"Life On The Edge of SR"
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