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Big Picture Money Management

  • #1
  • First Post: Jun 11, 2005 12:03pm Jun 11, 2005 12:03pm
I was wondering if anyone could recommend some sources addressing the subject of cross-strategy or cross-market money management.



I’ve found that trading multiple strategies can lead a trader to become dangerously overexposed even with careful and conservative money management within the context of each individual system. It’s very easy to find yourself in multiple trades on the same few currencies in the course of a week and forty or fifty 1% losses…..ouch!



I’m sure there are those who have devised much more elegant solutions than the crude methods I have devised for dealing with this, but I really don’t find much discussion of this topic.



DQ
If you trade without a sense of humility, one will be provided for you.
  • #2
  • Jun 11, 2005 6:52pm Jun 11, 2005 6:52pm
Quoting QFX67
I was wondering if anyone could recommend some sources addressing the subject of cross-strategy or cross-market money management.



I’ve found that trading multiple strategies can lead a trader to become dangerously overexposed even with careful and conservative money management within the context of each individual system. It’s very easy to find yourself in multiple trades on the same few currencies in the course of a week and forty or fifty 1% losses…..ouch!



I’m sure there are those who have devised much more elegant solutions than the crude methods I have devised for dealing with this, but I really don’t find much discussion of this topic.



DQ
Merlin has about 10 systems that he is trading and as far as I understand he gets his diversification from the diversity of systems. However there are also correlation tables showing the changes in correlation percentages for most of the major pairs and crosses -- that are updated regularly that can be found at various sites.

I typed in "forex correlation" into a search engine and found several links on this topic. Here is one: http://www.investopedia.com/articles.../05/051905.asp

FT
  • #3
  • Jun 12, 2005 3:42pm Jun 12, 2005 3:42pm
Quoting fijitrader
Merlin has about 10 systems that he is trading and as far as I understand he gets his diversification from the diversity of systems.
you know me too well

as long as the systems are negatively correlated, they will offer your portfolio diversification. but as ralph vince says "eventually, everything will have a bad day at the same time".

advanced money management is not for the faint of heart. crack open a Ralph Vince or Fred Gehm book and you will see what i mean. at the same time, money management is the most simple aspect of trading. to this day i still trade a plain jane %R model (risking x% on each trade). the real artwork comes from knowing how much your %R is for each system, and making sure your systems are not correlated.
Relax and be happy.
  • #4
  • Jun 13, 2005 11:12am Jun 13, 2005 11:12am
Thanks, Fiji and Merlin.

You've pointed me in the direction I wanted to go.

DQ
If you trade without a sense of humility, one will be provided for you.
  • #5
  • Last Post: May 10, 2019 8:48am May 10, 2019 8:48am
What factors cause harm from multiple strategies?
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