Money Management Mystique

[pedro01]

Backtesting gives an indication of how strategies performed in different market conditions in the past.

Now I trade STANDARD MM systems on live accounts and money management systems on forward tests.These MM systems have to be used with caution and care, plans have to be made for survival in worst case scenarios.They go live very soon ,they couldn't go live because my mm systems had a flaw ,until this morning when I figured out the final jigsaw in the puzzle of money management.

O D T

 

[Hotch]

It depends on what you class as Money Management.

A coin flip system with equal target and stop will not make money in the long run (bar awesome luck).

However, scaling in and out, different size stops to targets etc can make a coin flip strategy sucessful. I don't consider this money management though really. More system development. Money management (as in how you run your account) is never going to turn a system with negative expectancy into one with positive expectancy.

 

[Trader333]

If the markets became difficult ,I mean extremely difficult and markets do change,MM systems will give profits in conditions where only one out of ten trades is a win.

They can give 50 % profit per annum when standard systems are breaking even.

This sounds like Martingale to me which (if you have infinitely deep pockets), makes any random entry approach profitable, however in reality it is untradeable.


Paul

 

[oildaytrader]

This sounds like Martingale to me which (if you have infinitely deep pockets), makes any random entry approach profitable, however in reality it is untradeable.

Paul

Martingale is doubling up negative progression betting.

Advanced money management is also a negative progression betting , but with loads of twists and turns like increasing position sizes and decreasing position sizes.Martingale only increases positions sizes by doubling up.Advanced money management uses different rates of increasing and decreasing position sizes,it uses several complex increases and decreases in position sizes. .The end result of all the twists and turns of advanced money management is to make it trade able,and give a consistent average win loss ratio.

To trade AMM one does not need pockets as deep as martingaling

O D T

 

[Trader333]

Advanced money management is also a negative progression betting , but with loads of twists and turns like increasing position sizes and decreasing position sizes.

I would genuinely like to believe this but I cannot think of any branch of maths that this would work on in practical terms. This is because using random entry which at best is 50% and at worse as others have said including slippage and commissions has to be less than 50% doesn't make logical sense.

Please prove me wrong.


Paul

 

[oildaytrader]

Paul

Firstly I do not recommend anybody try this.I am prepared to handle this form money management , should we get a worst case scenario.

Look at the backtests of money management system
23 % win rate
9 max consecutive losing trades
average consecutive losers 4
profit factor 1.71

I only use this strategy for being profitable in extreme adverse trading conditions.I normally use standard systems.

Here are tests for standard systems over 4 years.Notice no new equity high for almost sixteen months from August 2006.These are results of automated systems.

 

[oildaytrader]

Paul

Here are more images of equity curve.I have about a hundred test reports like these.

 

[Splitlink]

If the markets became difficult ,I mean extremely difficult and markets do change,MM systems will give profits in conditions where only one out of ten trades is a win.

They can give 50 % profit per annum when standard systems are breaking even.

I have done extensive testing in bad market conditions in forex on euro usd and cable.

O D T

I doubt that, with due respect. One winning trade will have to make up for the other nine losers, with all the slippage, etc. included. and still provide a profit. I doubt whether there are many reading this thread who would agree with you.

 

[oildaytrader]

I doubt that, with due respect. One winning trade will have to make up for the other nine losers, with all the slippage, etc. included. and still provide a profit. I doubt whether there are many reading this thread who would agree with you.

Add the negative progression position size increase and your 10 th trade will recover your losses or part losses depending on the complexity of the system.I did state the actual mm system is propreitary.

 

[zupcon]

A good money management system can make a mediocre system or often a losing system into a profitable one.It works on increasing position sizes and decreasing position size as certain s/l or t/p are hit.

I use one , it is fully automated and it is proprietary and it has been back tested on multiple trading systems and it is successful.

O D T

What absolute complete and utter nonsense.

 

[oildaytrader]

What absolute complete and utter nonsense.

Thats the end of my contribution to this thread.

O D T

 

[megamuel]

Ohhh you and your big mouth zupcon! We nearly had the secret to endless riches then!

So how much are you selling this system for then O D T ? Can I have it for free, you must be loaded already

 

[pedro01]

Paul

Firstly I do not recommend anybody try this.I am prepared to handle this form money management , should we get a worst case scenario.

Look at the backtests of money management system
23 % win rate
9 max consecutive losing trades
average consecutive losers 4
profit factor 1.71

I only use this strategy for being profitable in extreme adverse trading conditions.I normally use standard systems.

Here are tests for standard systems over 4 years.Notice no new equity high for almost sixteen months from August 2006.These are results of automated systems.

The system you show has an average loser of $101 and average winner of $561.

I think we all know that if winners are 5x greater than losers, then you do not need a 50% win rate. The win rate is meaningless unless we know the size of the winners & losers. If your targets way exceed your stop loss, then of course you can have less than 50% winners.

Also - I can show you a chart for a stock that starts at say $100 and then ends up at $90 but you make a profit through dollar cost averaging. Does that mean that dollar cost averaging is a good idea ? Of course not, it just means it would have worked out better over all for the way price moved in that specific chart.

If the MM system is risking more as you lose, the risk is that a losing streak wipes you out.

 

[pedro01]

Ohhh you and your big mouth zupcon! We nearly had the secret to endless riches then!

So how much are you selling this system for then O D T ? Can I have it for free, you must be loaded already

I would guess it came from FXIgor on the forum he pointed us towards.

 

[zupcon]

Ohhh you and your big mouth zupcon! We nearly had the secret to endless riches then!

dont worry, I can say without a shadow of a doubt he'll be back