Discretionary money management? | Forex Factory

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Discretionary money management?

  • #1
  • First Post: Dec 28, 2007 6:15pm Dec 28, 2007 6:15pm
I haven't traded live yet; still learning everyday. I plan on using a discretionary system. With that in mind, is it common for successful FX traders to very their risk per trade? For example, in 60% of trades one may risk 1-2% of account, 30% of trades would risk 3%, with about 8% risking 4% and the remaining 2% risking 5% or more.

As I demo trade, I've found that usually the trade is just part of the normal system, making conservative MM extremely important. But sometimes, every now and than, "the stars are all lined up just right," I up my percentage, and (so far) have always been right.

Would you recommend this MM strategy in real world trading as well?


Thank you so much to all the generous and experienced posters here at FF! I've learned so much from you already.

-Tim
  • #2
  • Dec 28, 2007 6:35pm Dec 28, 2007 6:35pm
Quoting BDVtrader
Would you recommend this MM strategy in real world trading as well?
I personally think it's a bad idea unless you can specifically quantify "star alignment." The way to get good at trading is to do the same thing over and over again and do so without emotion. The decision to vary position sizing seems to add in another layer of discretion that just isn't necessary.

Some of my best trades are ones that I didn't think had a snowball's chance...On the other hand I've sat around all day waiting on the perfect signal only to see it blow up. In other words, just take your trades and stop guessing which ones will work out. Don't get fooled by randomness.
  • #3
  • Dec 30, 2007 10:28am Dec 30, 2007 10:28am
classical ryan jones sort of MM is purely quantitative and cannot help you with this...this is a "qualitative" problem wheter you should bet bigger when the market presents certain "opportunities" (which it does from time to time) or not...all you can do is to make sure that you will survive any possible drawdown resulting from those trades
  • #4
  • Dec 30, 2007 1:14pm Dec 30, 2007 1:14pm
Phil's reply is so right on. take heed of the item in Phil's signature as well. When you start to trade live do not trade at 2 - 5 % - this will kill you. Trade w/ .005% or less until you understand what your doing. Get plenty of trades under your belt. Learn how you react to trades. Then study what you have accomplished and how to improve it by adding a more effective money strategy. The trick is to last long enough to learn to trade.
Don't fall into the trap of thinking your going to make a killing in the markets your 1st or even 2nd year. Maybe you will but the odds are you won't.
Good Trading to you.
In trading, there is no bullshit. You either make money or you don't.
  • #5
  • Jan 3, 2008 10:34pm Jan 3, 2008 10:34pm
I would recommend to check out this link http://newsletter.neoticker.com/?p=128 It discusses different types of trade/money management, and the outcome in each case.
  • #6
  • Jan 4, 2008 11:29am Jan 4, 2008 11:29am
Quoting mrgreen
Phil's reply is so right on. take heed of the item in Phil's signature as well. When you start to trade live do not trade at 2 - 5 % - this will kill you. Trade w/ .005% or less until you understand what your doing. Get plenty of trades under your belt. Learn how you react to trades. Then study what you have accomplished and how to improve it by adding a more effective money strategy. The trick is to last long enough to learn to trade.
Don't fall into the trap of thinking your going to make a killing in the markets your 1st or even 2nd year. Maybe you will but the odds are you won't.
Good Trading to you.
Thanks for the advice mrgreen!
  • #7
  • Jan 4, 2008 3:59pm Jan 4, 2008 3:59pm
Quoting philmcgrew
I personally think it's a bad idea unless you can specifically quantify "star alignment." .....
Gaming theory supports Phil’s thesis. One needs to have demonstrably higher-than-normal expectancy, to justify an increase in position size (risk).

BTW, that’s how the Blackjack pros milked money from casinos during the 1970s-80s: dramatically increasing bet size when the remaining deck(s) were stacked with a disproportionate number of high cards, giving the player a temporary edge over the house.

David
  • #8
  • Last Post: Jan 4, 2008 4:08pm Jan 4, 2008 4:08pm
Quoting Pundit
I would recommend to check out this link http://newsletter.neoticker.com/?p=128 It discusses different types of trade/money management, and the outcome in each case.
Cool site. Thanks for posting!
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