Clueless money & risk management

[barjon]

Why you guys advising 1 to 2 % ?That is trader suicide advice.

http://www.trade2win.com/boards/risk-money-management/113254-1-risk-per-trade.html

you gave the advice, 15, we haven't been entering the advice fray have we?

 

[15 min tlb]

In some / many circumstances its suicide, in other circumstances, its not

The real problem is that the answer isn't a simple constant, but its probably pointless discussing it further with someone who doesn't even understand the basics of fixed fractional position sizing

15 consecutive losses at 2% isn't 30%

Figure of speech , but it is a terrible situation to get into 26 % loss on account.After a 26 % loss of account , the trader will be psychologically on more Valiums to trade further.He won't be able to continue.


The point I am trying to make is , the anything above 0.5 % is too much to risk per trade especially for amateurs.

 

[Liquid validity]

The point I am trying to make is , the anything above 0.5 % is too much to risk per trade especially for amateurs.

In essence what you are saying is basically not bad.
Not mentioning the other related and just as important factors is
missing a large part of the equation.
No need for me to go over it again, BSD's thread I posted earlier covers
it in much better detail, so why duplicate that effort?

Suffice to say, the risk should be 0% if you can't answer the others questions
you haven't even mentioned.

 

[15 min tlb]

In essence what you are saying is basically not bad.
Not mentioning the other related and just as important factors is
missing a large part of the equation.
No need for me to go over it again, BSD's thread I posted earlier covers
it in much better detail, so why duplicate that effort?

Suffice to say, the risk should be 0% if you can't answer the others questions
you haven't even mentioned.

Mm has to be looked at independently of all factors , since distribution patterns of other factors are not constant and can change or even fail out of whack.Your risk reward , hit rates , set up probability etc can lose correlation to past performance , that is when traders blow out.At that stage mm has to be looked at independently.

 

[Liquid validity]

Mm has to be looked at independently of all factors , since distribution patterns of other factors are not constant and can change or even fail out of whack.Your risk reward , hit rates , set up probability etc can lose correlation to past performance , that is when traders blow out.At that stage mm has to be looked at independently.

How does MM compensate for no edge or edge failure exactly?
Position sizing can only be based on the factors of your edge.
If it fails, MM won't revive it.

 

[the hare]

Mm has to be looked at independently of all factors , since distribution patterns of other factors are not constant and can change or even fail out of whack.Your risk reward , hit rates , set up probability etc can lose correlation to past performance , that is when traders blow out.At that stage mm has to be looked at independently.

Totally in agreement regarding strike rates etc changing, and the impact this has on optimization of MM. Having said that most traders have some sort of method that tells them that a method has stopped working. That might be simple drawdown limits as a dollar amount, or percentage of equity etc, or something a little more sophisticated.

Relentlessly trading until the account disappears isn't the only option (although it might be a perfectly valid method in some cases)

All the bits of the puzzle are quite openly discussed even in places such as the zoo, so there's no excuse for anyone not to know or apply this stuff. There's no advice that you can offer as everyone's risk tolerance is different, everyone's methods have different strike rates etc

I might not agree with the 2% figure, and I'm more inclined to go with your 0.5% suggestion, but all its doing is trying to provide a balance between limiting risk, and achieving well above average returns. As a starting figure, its at least in the right ballpark.

 

[tar]

The 2% figure is just an example , nobody said you have to risk 2% , if you trade with 20 pips SL then 2% is big , but it isn't for swing traders with 200 pips SL .

 

[15 min tlb]

How does MM compensate for no edge or edge failure exactly?
Position sizing can only be based on the factors of your edge.
If it fails, MM won't revive it.

Figure it out with your intelligence , a 50 % hit rate system with an equal target and stop loss , can have a variable position sizing system where distribution of profits and losses is unknown , can actually provide more consistent profits and be highly profitable .

This is why I don't follow the BSD boolox and links , as I said don't follow Gurus ....use your own intelligence , and I know you have plenty .......without me handing it on a plate

 

[Liquid validity]

Figure it out with your intelligence , a 50 % hit rate system with an equal target and stop loss , can have a variable position sizing system where distribution of profits and losses is unknown , can actually provide more consistent profits and be highly profitable .

This is why I don't follow the BSD boolox and links , as I said don't follow Gurus ....use your own intelligence , and I know you have plenty .......without me handing it on a plate

No I know exactly what you mean.
I just don't subscribe to that school of thought.
That is placing greater weighting and importance on certain trades over others.
Whilst that may be a valid discretionary approach, I automate, so the best
approach is to treat all trades as equal, for me at least.

As for risk per trade, mine is based on hard max stop, which is rarely hit.
So in that sense, my risk does alter, but I don't know that in advance,
or rather the algo doesn't, so it is safer to base it on max loss,
even though average loss per trade is about 60% ish of max risk.
Increasing risk based on average loss increases drawdown, which is about
the only stat I truly care about.

 

[Shakone]

Some people come to trading and have ideas in their head about Kelly Criterion. They have some ideas about the probability of a curve-fitted back-tested system with high win rate, and they believe that kelly tells them they should be risking 20-25%. Bringing them down to a more realistic 1% is a blessing.

 

[15 min tlb]

Some traders trade probabilities, they don't trade trends , as trends as are rare and often trend trading is unprofitable.These traders look for 10 to 30 pip target , on many trades during the day.They do 30 to 40 trades with a target of 10 , with a stop of 20 , 25 trades will give 250 pips average ,5 will be breakeven , 10 will lose they 200, their daily net will be 50 pips ,

All these risk reward ratios per individual trades is not necessarily applicable to them.Again standard advice on mm and risk management is also not applicable to them.

 

[Liquid validity]

Some traders trade probabilities, they don't trade trends , as trends as are rare and often trend trading is unprofitable.These traders look for 10 to 30 pip target , on many trades during the day.They do 30 to 40 trades with a target of 10 , with a stop of 20 , 25 trades will give 250 pips average ,5 will be breakeven , 10 will lose they 200, their daily net will be 50 pips ,

All these risk reward ratios per individual trades is not necessarily applicable to them.Again standard advice on mm and risk management is also not applicable to them.

Anyone who does 30-40 RT per day without substantial comms discount, rebates
or earning the spread needs their head testing...
Thats the bulk of the profit, or even more (usually all of it including your roll), given away.

 

[15 min tlb]

Anyone who does 30-40 RT per day without substantial comms discount, rebates
or earning the spread needs their head testing...
Thats the bulk of the profit, or even more (usually all of it including your roll), given away.

What are the probabilities of their profits being given away ? What is the probability of you knowing their method , and that the probability the method does have a an edge far greater than the costs of over trading?

 

[Liquid validity]

What are the probabilities of their profits being given away ? What is the probability of you knowing their method , and that the probability the method does have a an edge far greater than the costs of over trading?

It doesn't matter.
You are still giving away a massive chunk,
which is quite likely to be a game breaker at some point in the future,
even if its possible in the short term.
For that kind of trading, low costs, and earning the spread is the only way
anyone with an ounce of sense would do it.
If you can't see that, I'm baffled.

 

[15 min tlb]

It doesn't matter.
You are still giving away a massive chunk,
which is quite likely to be a game breaker at some point in the future,
even if its possible in the short term.
For that kind of trading, low costs, and earning the spread is the only way
anyone with an ounce of sense would do it.
If you can't see that, I'm baffled.

I have done back testing on automated systems , these don't earn any profit ...but just break even on 10 years of data.Applying this with the power and flexibility of human minds and imagination will yield unimaginable profits.The edge of the human brain tilts it to 70 % hit rate.

The game breaker can be beaten with variable position sizing , though the first strategy of the human brain will work and it won't be necessary,

 

[Liquid validity]

I have done back testing on automated systems , these don't earn any profit ...but just break even on 10 years of data.Applying this with the power and flexibility of human minds and imagination will yield unimaginable profits.The edge of the human brain tilts it to 70 % hit rate.

The game breaker can be beaten with variable position sizing , though the first strategy of the human brain will work and it won't be necessary,

I give up, no offence

 

[15 min tlb]

I give up, no offence

I have about 50 working EAS , but I do not use them and given up on automation , they only make 10 % per annum .

Barjon says people who can't trade are seeking automation as the alternative.

 

[15 min tlb]

LV

122 trades , loss 1634 pips (30 stop pips)
296 winners , profit 2960 (10 pip target)
59 % win rate
average profit 3.18 pips per trade

 

[barjon]

.............Barjon says people who can't trade are seeking automation as the alternative.................

I know the old memory is highly suspect now, but that's news to me - when did I ever say that?

 

[the hare]

Anyone who does 30-40 RT per day without substantial comms discount, rebates
or earning the spread needs their head testing....