looking to build aggressive MM strategy

Of course I will promote the money management I came up with from scratch.

http://www.forexfactory.com/showthread.php?t=103920

I don't believe in Kelly because it is impossible to quantify probability of setups with chart patterns. The method simply makes the most sense for aggressively compounding, but is not for the faint of heart.

Also see the thread "What's an account for anyway?" by me. It is a great complimentary read to any seriously considering using this MM.

What moves the markets is far too complex to explain for this type of forum. Furthermore, what moves the markets truly is not a concern of mine.

What is a concern of mine is "when", "how much", "in what direction", and "how frequently" will I be able to capture that move.

I call it simply: Timing, Direction, Magnitude and Probability.

What moves the markets is far too complex for any human being to both store and process in their head under real-time market conditions. To attempt to code such a system with a computer is possible, but it would take years of research, development, testing, analysis, and tweaking. However, it could be done to a fairly precise degree of acuity.

But, this is not what most people want to hear. Most people want to hear about the silver bullet theory. The fact of the matter is this: no human being alive on planet earth can trade the market consistently and accurately without a CLEAR understanding of Timing, Direction, Magnitude and Probability.

Trading without this understanding is nothing more than guessing. And, you don't want to guess with your hard capital.

So, start with "Magnitude", and that will open the door to Timing and Direction which will then allow you to calculate Probabilities. Magnitude is nothing more than Delta over Time. (^/t)

You will need to pick a time-frame (a bar of data) and then determine the price delta between two (2) clearly identifiable points within that bar of data. Then measure the average delta between those two points over X number of bars. Use that as your baseline. Study that baseline until you know when the delta is expanding, or contracting.

Then you will be ready to tackle the next big one which will be Direction. Direction is a derivative of Magnitude and Timing is a derivative of Direction.

People don't do well in this business only because they don't yet understand the baseline principles of what constitutes "price".

Price is not what you think it is. The eurusd for example is not $1.2405 at the close of 9/10/05. Price is multi-dimensional and in reality is does not have a point of singularity. True "price" is diffused through both space and time. You cannot actually “see” price with your naked eye because “price” as you think of it simply does not exist. Price is definitely non-linear and very abstract. It has no “place of being”, no “where”, no “there” by itself.

When I trade, I don’t trade where the market is right now. I trade where the market is going to be at some point in time in the future. Price has a built-in multi-dimensional structure that spans an endless number of interlaced bars of time. Price is more like a piece of fabric than a definite “value”. People get hung up on “value” and “valuations” when trying to trade and that’s non-sense. For the trader, the concept of “value” does not apply. We move in and out of the market too fast for “value” to have any grip on what we do. So, dispense with “value” language – it won’t fly here.

When you think about “price” you will have to start thinking about “structures” with multiple dimensions across multiple time-frames moving at different rates of speed simultaneously, yet having a definite “pattern” and “form” or “geometry”.

When you can learn to see price as a “structure” having length, width, height and a time dimension, then you will be ready to enter the next phase which is Probability. The Probability merely determines the likelihood that the structure of price will be maintained over X bars. Once you are confident that the structure of price will be maintained over X bars, then you will be able to enter orders with a higher sense of purpose, seeing what most others in the market don’t, won’t, or can’t.

Of course, all it takes is one good news flash to come across the wires to blow the structure into bits – but, that’s the risk we all take and that is why we use Stops and Recovery trade strategies.

I would not worry too much about what “moves” the market – a super computer would have difficulty with that question in real-time. Instead, I would focus first on what constitutes the “Magnitude” of the currency pair that I was interested in trading for the time-frame that I was interested in trading it. You could make a living just on Magnitude alone without getting anymore sophisticated or complex.

Forget conventional TA, everybody and their dog uses it. You are going to have to build your own TA from raw data. So, start with raw Forex data and begin the process of studying it and analyzing its behavior over whatever time period is of interest to you. Get very familiar with the deltas within the raw data points of a single currency pair until you begin to see the “fabric” of the price within the pair itself unfolding before it happens. Then you can worry about creating the trade logic, rules and protocols – but you can’t have any of that until you first understand how the data likes to “flow”.

Rule number 1: Price is composed of data points.

Rule number 2: All data flows.

Rule number 3: Data has structure.

Rule number 4: The law of Inertia applies to market data structures.

Figure out the structure of the data (price) and you will be much better at projecting the “next” move.


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The above post was by a person with the signature of tradevector. Unfortunately he was hounded off every board he ever posted to.
I was and still am a student of his methods and principals, somewhat changed to suit my own trading style.


You won't find anything on FF that comes even close.


Roy

Roy - if your friend's way of perceiving price actually makes money for you, so much the better, but I find myself getting simpler and simpler in every aspect of my trading, including MM. To respond to the title of this thread, I think you have a simple choice : you either research (as you obviously have done) and find a well-formulated method, or do what I am doing. Having somewhat trashed tdion on another thread only yesterday, I have to admit his own MM ideas to which he has posted a link are very original.

But I have in recent months adopted a VERY simple Jacko-style MM approach which has very rapidly accelerated my positon size : I was still trading minilots last summer and I have been at $1m since last November. My thinking was heavily influenced by Jacko to whose blog I subscribe (truly enjoyable reading & excellent value for $500). I do not trade Jacko's way, btw : I trade 5 min charts or shorter with very small stops (max 20 pips) running a slightly > 60% win rate since I resumed trading after my August vacation (that includes an embarrassingly large amount of "mistakes").

Jacko essentially had a few early wins, starting if I recall correctly with 2 full size lots. His approach was then to "put the pedal to the metal" and risk ALL his profits by aggressively and rapidlly increasing his position size. He supposedly did that all the way up to $20m position size (200 lots). Sitting on a beach last summer, I pondered how to accelerate my account. I decided that I needed three elements : a win rate of at least 60%*, very small stops and CONFIDENCE, which I knew I still did not have enough of, despite years of trading. So as soon as I got back, I started getting up at 6am to have an hour of silent meditation and contemplation to myself, to visualise myself trading much larger amounts; after about a month, during which I had some big winning streaks, I started some aggressive jumps 3 to 6 minilots > 1 full size > 3 full size > 10; I'm now pausing as I've decided that my stop limit breakout entries need to be changed (I posted elsewhere about this earlier today). My goal is to reach $10m by the end of this year, subject to practical execution limits.

The bottom line is this : to make serious money you need position size, not hundreds of often theoretical pips. The way to get there doesn't have to involve complex mathematics (at least if you are discretionary trader, as I am). But it DOES - probably for most of us - involve some significant inner changes.
HTH.
J.

* the 60% win rate was not mathematically calculated : it was a personal psychological requirement.

interesing these coincidences. I was about to post the same question Igot posted to Roy in Jan 3 (two years after the last post) but i forgot to write this as aways.

And i see he did not answer

BTW i just found another MM that i am interesd.

http://www.forexfactory.com/showthread.php?t=47732

hey David, if you still here could you explain (here or in reply to the the link above) what is the sacrificy the needs to do to use this MM? Because he is showing negative pips with profits

I never thought this thread would ever see the light again.
There has been lots of water ( and trades ) flow under the bridge in the last two years.
If I missed any questions I apologise, as I do not subscribe to threads and find hanging around this place breaks my concentration when trading, hence I tend to stay away more and more.
The bottom line when it comes to MM. depends on having and knowing when to apply your trading edge. Without understanding how and why your edge works, under all market conditions, you will end up without any money to manage!
I shudder to think how many hours I have in this business, like most I've blown up several small accounts before turning it around. When I started this thread two years ago I was fairly green about the psychology of it all.That has been my worst demon to overcome. Most of those negative thoughts are behind me now.
Who knows what the future holds?

Roy

Hi David - Yes it is the same Ingot54!

Didn't know you were over here, so will try to dig out more of your (usually) brilliant posts and discussions.

My mention of the Ryan Jones Fixed Ratio method of maximising profitability, was designed to uncover exactly the stuff you responded with.

I am not mathematically gifted, but I can see that there is a difference between:

Fixed Lot
Fixed Ratio
Fixed Fraction

Using Fixed Lot position sizing, risking the same number of lots regardless of account growth or contraction, may be simple, but it seems to me that it fails to capitalise on the advantages of increasing the number of lots in line with profits, and vice versa.

Fixed Ratio uses the concept of increasing the number of lots only when a milestone growth target is achieved in the account. This method may be OK for larger accounts where multiple positions are opened in a variety of instruments (or several currency pairs, for example). I can see that while this may accelerate growth, it also increases the Risk of Ruin should all open trades fail simultaneously, followed by a repeat dose on the next series of trades!

This leaves Fixed Fractional position sizing. It appears simple, in that it purports to use a fixed percentage of the account, regardless of the rise or fall. That is to say - more lots as the account grows, and fewer as the account contracts.

If my thinking is correct, Fixed Fractional position sizing would be the best of the three, providing a pre-determined Stop Loss is adhered to, and the number of open positions is limited to the ability of the trader to manage them comfortably during market swings. Again, Risk of Ruin needs to be considered using other than Fixed Lot MM.

If you look back at myprevious post #78 you see that I was favourably discussing Ryan Jones' Fixed ratio MM but I have definitely swung behund FF MM now.

The bottom line for me at this stage of my evolutionary trading journey, is that I am thinking about Plan B ... how to improve my profits. Whether one method is better than another is a bit like splitting hairs. The point (for me) is about making SOME difference - ANY difference - as long as it is an improvement.

I would not like to go through a relatively successful period of trading and look back and see that the application of a simple MM plan, would have delivered me another 500%!

Is there a better way?

Actually, it is the reverse: you reduce the % as equity grows, and increase the % as equity shrinks. So when you have $500 in your account, you are risking far more (%) than when you have $50,000. It is a way of growing your account (relatively) quickly then locking in profits.

You could do the same thing using fractional MM, and just reduce the % as your account grows, like risk 10% of your $1000 account per trade, and gradually reduce this to say 1% of your $100,000 account (notice your positions would be 10x bigger than when you started, even though your risk is 10x less). The only problem is that you would just be guessing when is a good time to reduce your risk %.

The strength of fixed ratio MM is it gives you a systematic/efficient way of reducing your risk as your account grows, while still taking advantage of geometric growth. It lets you take big risks at the beginning to grow your account, then reduces your risk to guard against losing it all. Also it sticks to the principle of "equal achievement", in contrast to fixed fraction MM which makes your early profits more difficult to achieve, relative to your later profits.

The problem with fixed ratio MM is that it is "locked" to the size of a contract (lot). For example, if you apply it to mini-lots, your risk will decrease rapidly, and you will very quickly approach linear (instead of geometric) growth.

Therefore the fixed ratio "delta" and lot size need to be tuned to your starting balance, goals, and appetite for risk. I had to figure this out myself as I haven't read about it anywhere, no one seems to talk about it...? A properly tuned fixed ratio formula gives you more control over your MM: it lets you decide how quickly to grow your account, at what level to decrease risk and how quickly, etc.

when you have tp(20) and p(80%),you also need sl to decide how many percent to use each time.