Hi traders,

I would like to post a discussion about how to work out a money management model for multiple strategy trading method. This is a rather open-end question. Let me elaborate more.

Suppose a trader uses a number of different setup types for his trading and each of his setup type has a different win rate, risk reward ratio and frequency of occurence, and all these setup types show a positive expectency. How should he set up his money management model, so that he know the position size he should use for each setup type.

To simplify the issue, I instantiate an example with number values, although mathematical calculation is not the main theme in this post. To simplify the example, assume that there are no breakeven using or partial profit taking.

Setup....Win...........Risk:................Freq. of

1..........50%..........1:2 - 1:3..........High

2..........60%..........1:1 - 1:2..........Low

3..........75%..........1:1..................High

4..........80%..........1:1 -1:2...........Very Low

Questions are:

1. How should the trader decide the position size for each of these setup types?

2. What principles should he use when working out his money management model?

3. What else should he take notice of?

kk007

I would like to post a discussion about how to work out a money management model for multiple strategy trading method. This is a rather open-end question. Let me elaborate more.

Suppose a trader uses a number of different setup types for his trading and each of his setup type has a different win rate, risk reward ratio and frequency of occurence, and all these setup types show a positive expectency. How should he set up his money management model, so that he know the position size he should use for each setup type.

To simplify the issue, I instantiate an example with number values, although mathematical calculation is not the main theme in this post. To simplify the example, assume that there are no breakeven using or partial profit taking.

Setup....Win...........Risk:................Freq. of

__Type__.....__Rate__..........__Reward__............__Occurence__y1..........50%..........1:2 - 1:3..........High

2..........60%..........1:1 - 1:2..........Low

3..........75%..........1:1..................High

4..........80%..........1:1 -1:2...........Very Low

Questions are:

1. How should the trader decide the position size for each of these setup types?

2. What principles should he use when working out his money management model?

3. What else should he take notice of?

kk007