Help! -MM plan based on Van Tharp

I want anybody who tried using creative type of MM to give me a thought of how to improve my plan and if they think its flawed.. (I've attached the file I am basing my plan on)

This is a blueprint of my not yet ready MM strategy:

Rules-
1) All new opened positions will not surpass 5% risk (individually) EVER!
2) The default fixed risk fraction is equal to 3%

The Plan-
Have as many open positions in my account but the total exposure ("portfolio heat") of all open position will not surpass 80% of Optimal f (Kelly Criterion)..

When drawdowns eventually affects my account to the point that I have less than my initial deposit ,I will lower my default fixed risk fraction to as low as 1/2% (I didn't decide the parameters yet and if to also lower the % of Optimal f-any suggestions will be helpful-) to not blow my account until I get back to my initial deposit!

If I start to make profit I will increase my default fixed risk fraction to as high as 4% (maybe 5%).

The biggest problem I'm struggling is when to raise my default risk fraction and more importantly when to save my earnings (a.k.a- regard to gained money as my initial deposit) so I have 3 options-
A) Each time my account reaches X amount of $
B) Each time my account reaches X amount of %
C) Each time X amount of time passes by

I am leaning towards option B which means I will decrease my default fixed risk fraction back to 3% each time I will have a 100% account growth (this is an example ).

What do you think? I am just using optimal f for calculating the amount of total exposure to the market at a given time without risking all of it on a signal trade!

You will blow up your account if you use optimal F. Unless you have very different criteria for why trades are placed at the getgo, due to the high level of correlation in forex many trades are simply a variant of long/short USD.

Try coming up with a grading system for your trades, the better ones risk more and the lesser simply risk less.

Good reply foto..
Lets assume I will not take trades that have a high correlation for now. The whole point is not to base my "grading system" per individual trade as to more per a set of trades.. You see what I mean? What do you think?

Hey Oz

Not an answer to your question, but have a look at this:

http://www.forexfactory.com/showthre...ferrerid=35876

Thanks a bunch bill!

I have taken a look at that thread and it is something I'll be thinking about for at least this next week..

Good to have a friend around..

Anybody has an opinion?

Hi,
Statistical traders or "quants" have all kinds of mathematical models for programming their computers. If that is what kind of a trader you are, and are profitable over time then your financial goals might be achieved through creative money management.

I generally like to buy or sell good bargins when the market hands them to me on a silver plate. Then I will put on a larger position. I do not agree with Van Tharp that in effect all trades are the same and that mathematics means more then knowing the market one is trading.

But as it is said "every one gets what they want from the market" whether that be profits or losses.

Good luck

Quick followup,
I have a lot of respect for Van Tharp, he does a lot of good.
But for beginning traders many of whom do not understand much of anything, learning their A,B,C's before taking on risk is a more prudent course of action.
In this way one can learn how their own mind processes information and makes good judgements.
One can also discover the kind of information one requires to make those same decisions.
Good, even great money management can not turn a losing method into a winner. When running a startup business, turning a profit with a business plan based upon an assessment of how to do it, is the only way to overcome the inevitable initial miss steps.

When starting upon a journey arround the world, even Magellan would have been lost at sea without a way to navigate.

Thanks for your input foto!