Money Management Fixed vs Ratio fractional.... - futures io
futures io futures trading



Money Management Fixed vs Ratio fractional....


Discussion in Psychology and Money Management

Updated by kevinkdog
    1. trending_up 1,042 views
    2. thumb_up 3 thanks given
    3. group 1 followers
    1. forum 3 replies
    2. attach_file 0 attachments




Welcome to futures io: the largest futures trading community on the planet, with well over 100,000 members
  • Genuine reviews from real traders, not fake reviews from stealth vendors
  • Quality education from leading professional traders
  • We are a friendly, helpful, and positive community
  • We do not tolerate rude behavior, trolling, or vendors advertising in posts
  • We are here to help, just let us know what you need
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

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

 
Search this Thread
 

Money Management Fixed vs Ratio fractional....

(login for full post details)
  #1 (permalink)
Memphis,TN
 
 
Posts: 232 since Sep 2010

If hypothetically a trader " feels " as if they have found a system / method that is profitable ( even though they have never backtested it, Monte Carlo, Walkforward, etc.... ), they just feel as if they have a profitable and robust strategy


Assuming this, what would you recommend as far as Money Management and how to trade...... would it be smarter to employ a Fixed Fractional ( Risking 2% on each and every trade, regardless if you're up +$1,000 in your account OR if your down -$1,000 in your accoung, you will still risk 2% on every trade OR would using the Ratio method work better in this example ( where we use a Delta of say $500 , so using a starting Bankroll of $1,000 , trading just 1 standard lot and a delta of $500 , the sequence would be ...... $1,000 + 1 ( lot ) x $500 = $1,500 ( so once are account is up to $1,500 we would then add another Lot and start trading 2 Lots, and would NOT move up to trading 3 Lots Until......
$1,500 + 2 x $500 - $2,500
So on and so forth )





Thanks so much for everyone's time and help, Really appreciate it - Michael

Reply With Quote

Can you help answer these questions
from other members on futures io?
DOM: Why do prices move in direction of cumulative depth?
Emini and Emicro Index
OPEN_CLOSE_DOTS
ThinkOrSwim
Times and Sales more data to be displayed
TradeStation
is there an easy way to obtain by code the price variation percentual
MultiCharts
IB Bracker Order
Platforms and Indicators
 
 
(login for full post details)
  #3 (permalink)
Market Wizard
Cleveland Ohio/United States
 
Experience: Advanced
Platform: Tradestation
Broker: Tradestation, DeCarley, others
Trading: futures
 
Posts: 2,793 since Jul 2012
Thanks: 1,440 given, 5,385 received



mdsvtr View Post
If hypothetically a trader " feels " as if they have found a system / method that is profitable ( even though they have never backtested it, Monte Carlo, Walkforward, etc.... ), they just feel as if they have a profitable and robust strategy


Assuming this, what would you recommend as far as Money Management and how to trade...... would it be smarter to employ a Fixed Fractional ( Risking 2% on each and every trade, regardless if you're up +$1,000 in your account OR if your down -$1,000 in your accoung, you will still risk 2% on every trade OR would using the Ratio method work better in this example ( where we use a Delta of say $500 , so using a starting Bankroll of $1,000 , trading just 1 standard lot and a delta of $500 , the sequence would be ...... $1,000 + 1 ( lot ) x $500 = $1,500 ( so once are account is up to $1,500 we would then add another Lot and start trading 2 Lots, and would NOT move up to trading 3 Lots Until......
$1,500 + 2 x $500 - $2,500
So on and so forth )





Thanks so much for everyone's time and help, Really appreciate it - Michael


I don't think it matters, it is just different ways of gambling.

Without knowing how the strategy is going to perform, just randomly select one method or the other.

You can easily lose all your money using either money management technique. And trading on feelings is probably going to lead to just that.

Follow me on Twitter Reply With Quote
The following user says Thank You to kevinkdog for this post:
 
(login for full post details)
  #4 (permalink)
Market Wizard
Cleveland Ohio/United States
 
Experience: Advanced
Platform: Tradestation
Broker: Tradestation, DeCarley, others
Trading: futures
 
Posts: 2,793 since Jul 2012
Thanks: 1,440 given, 5,385 received

OK, so let's go a step further. Let's say you know exactly how the strategy performs historically...

So, you apply 2 money management techniques to that historical data:

1) fixed fractional

2) fixed ratio


And, you find one is tons better, profit wise, reward/risk wise, drawdown wise, etc. One is clearly superior.

So, you decide to trade the better one. Is that a good idea?

I'd say "NO." 2 reasons:

1) by comparing 2 approaches, and picking the better one, you've just optimized for money management technique.

2) change up the order of trades a little bit, and you could get radically different results.

Follow me on Twitter Reply With Quote
The following 2 users say Thank You to kevinkdog for this post:


futures io Trading Community Psychology and Money Management > Money Management Fixed vs Ratio fractional....


November 14, 2014


Upcoming Webinars and Events
 

Dealing with burnout w/Linda Bradford Raschke

Elite only
     



Copyright © 2020 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