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Money Management - the art of the exit

  • #21
  • Dec 21, 2010 8:32am Dec 21, 2010 8:32am
Quoting wguan
sry, i am not particularly fast in learning ,

another follow up question: are you saying that if i don't put a stoploss, the backtest will simply treat my trailing stop as my stop loss?
um, what?

a trailing stoploss... is a stoploss (that is trailed).

your question makes no sense. forget about the way mt4 does stop loss trails. that's it's own thing and how it decided to do it. the ea obviously just blindly trails a stop, whether in profit or loss, unlike mt4 which waits until profits before it's half-assed trail kicks in.
Congratulations ScalaFX for coming out of the closet!
  • #22
  • Dec 21, 2010 11:54am Dec 21, 2010 11:54am
Quoting nubcake
if entry is 50 / 50 then why isn't exit 50 / 50 (could run further / could retrace)?
That's exactly correct IMO. Both entries and exits adjust net position, and are therefore equally important. The only question a trader should ask is: "what is price more likely to do - rise or fall - henceforth?", and adjust his position (long, short or flat) accordingly. If the answer at every point is "I don't know, it's always 50/50", then the trader has no edge.

For me, exits are not MM, they are part of trading methodology. Like entries, exits can provide an edge, but MM can't.
  • #23
  • Dec 21, 2010 12:11pm Dec 21, 2010 12:11pm
Quoting hanover
That's exactly correct IMO. Both entries and exits adjust net position, and are therefore equally important. The only question a trader should ask is: "what is price more likely to do - rise or fall - henceforth?", and adjust his position (long, short or flat) accordingly. If the answer at every point is "I don't know, it's always 50/50", then the trader has no edge.

For me, exits are not MM, they are part of trading methodology. Like entries, exits can provide an edge, but MM can't.
QFT
  • #24
  • Edited 6:08pm Dec 21, 2010 12:15pm | Edited 6:08pm
Quoting hanover
For me, exits are not MM, they are part of trading methodology. Like entries, exits can provide an edge, but MM can't.
I am afraid I will have to disagree with you regarding MM inability to provide an edge..... Maybe it would be more accurate to say MM assists or enhances the edge.

Here is a system that is a continuation trade of Fridays price and held through the weekend till the Monday open at which time the trade position is closed and reversed then held till the Tuesday open and closed out completely.

Here are the results for the last two years.
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  • #25
  • Dec 21, 2010 12:58pm Dec 21, 2010 12:58pm
Quoting hanover
For me, exits are not MM, they are part of trading methodology. Like entries, exits can provide an edge, but MM can't.
hey hanover..... you've said something similar before and after searching your posts several times i could not find your definition of 'MM', ie what does it incompass....

usually you write in great lengths so i might have skimed over it by mistake..... do you recall if you've given your definition....


mm for some might include stoploss, profittarget, lot size, trailing stop, margin, available balance, type order and on and on.....

i would be and have been courious to know...... if and only if, ya have the time of course......thanks.....h
to trade and code, keep both simple... no call to impress....h
  • #26
  • Dec 21, 2010 1:10pm Dec 21, 2010 1:10pm
Quoting tradestar1
Maybe it would be more accurate to say MM assists or enhances the edge..
hey tradestar..... was curious as to which aspect of 'MM' is being represented in your graphs.....

"MM' can include so many different factors with different traders...... are you considering a predefined opening and predefined closing as part of 'MM'..... just wondering, that's all.......h
to trade and code, keep both simple... no call to impress....h
  • #27
  • Edited 9:53pm Dec 21, 2010 3:57pm | Edited 9:53pm
Quoting hayseed
hey tradestar..... was curious as to which aspect of 'MM' is being represented in your graphs.....

"MM' can include so many different factors with different traders...... are you considering a predefined opening and predefined closing as part of 'MM'..... just wondering, that's all.......h

Each trade is opened and closed at a specific time, You risk a fixed amount of your balance, and the SL is a fixed amount as well, except a couple trades when I tried an alternative and that blew up in my face so back to the basic rule of the method.

I have to add here that I do agree no amount of MM alone is going to make a loosing system profitable.
But if you have a method that displays a proven edge MM will inprove your returns.
  • #28
  • Dec 21, 2010 5:07pm Dec 21, 2010 5:07pm
Quoting tradestar1
Each trade is opened and closed at a specific time, You risk a fixed amount of your balance, and the SL is a fixed amount as well, except a couple trades when I tried an alternative and that blew up in my face so back to the basic rule of the method.

I have to add here that I do agree no amount of MM alone is going to make a loosing system profitable.
But if you have a method that displays a proven edge MM will inprove your returns.
yes.

that's the whole freakin point of using 'correct' MM. you certainly don't use some whacked-out MM that destroys an edge, do you? the same thing could be said for getting enough sleep and getting laid... you want things that will 'enhance' your trading results. this is a given.

i don't understand your point, or you have none?
Congratulations ScalaFX for coming out of the closet!
  • #29
  • Dec 21, 2010 5:20pm Dec 21, 2010 5:20pm
my sl is called margin
Hero calls followed by margin calls...
  • #30
  • Dec 21, 2010 5:28pm Dec 21, 2010 5:28pm
In a nutshell, money management is "Capital Preservation"! Both your entry and your exit have to be timed. We're not counting on an entry immediately going in our favor, but when we exit we want to make sure that we aren't leaving pips on the table!

Both are equally important; one in the name of "Increasing Capital" and the other in the name of "Capital Preservation"! If you can't or don't increase your capital you're no better than the Joe next door and if you can't preserve your capital you're not better than the Sally next door!
  • #31
  • Dec 21, 2010 5:32pm Dec 21, 2010 5:32pm
Quoting GulfCoastPip
In a nutshell, money management is "Capital Preservation"!...
actually we just should set a sl and tp while placing an order, EVERYTIME, actually....
Hero calls followed by margin calls...
  • #32
  • Dec 21, 2010 7:47pm Dec 21, 2010 7:47pm
Anyone uses expert advisors? how do you manage your trades with them.

I have been backtesting a OzFX_MethodV2 for a while and the backtest is just not working,

I would ultimately want to bring some EA to live trading, but how do you go about personally determining whether an EA works? Forward testing? or backtesting?

And how do members of FF use backtest, how do they analyze the results?

Currently my way of doing it is to whip out an EA that has a interesting system and test it with different money management inputs. I want to have it profitable in here before I forward test it.

what do you guys think?
  • #33
  • Dec 21, 2010 7:50pm Dec 21, 2010 7:50pm
Quoting nubcake
yes.

that's the whole freakin point of using 'correct' MM. you certainly don't use some whacked-out MM that destroys an edge, do you? the same thing could be said for getting enough sleep and getting laid... you want things that will 'enhance' your trading results. this is a given.

i don't understand your point, or you have none?
Aw geeeez.... did somebody miss their nappy today?
  • #34
  • Dec 21, 2010 8:09pm Dec 21, 2010 8:09pm
Quoting tradestar1
Aw geeeez.... did somebody miss their nappy today?
yes.
Congratulations ScalaFX for coming out of the closet!
  • #35
  • Dec 21, 2010 8:16pm Dec 21, 2010 8:16pm
Quoting hayseed
hey hanover..... you've said something similar before and after searching your posts several times i could not find your definition of 'MM', ie what does it incompass....

usually you write in great lengths so i might have skimed over it by mistake..... do you recall if you've given your definition....


mm for some might include stoploss, profittarget, lot size, trailing stop, margin, available balance, type order and on and on.....

i would be and have been courious to know...... if and only if, ya have the time of course......thanks.....h...
The problem is that everybody's definition of "MM" is different. My current way of thinking, FWIW, is as follows:

At any point, you're either net long, short or flat. You can use entries and exits to achieve this, you can nedge, you can add or subtract positions by scaling in/out, ....... whatever. SLs or TPs likewise adjust your position, by returning from long or short to flat. All order types are merely vehicles to adjust your position. Your P/L is determined by how heavily net long you are while price is rising, or net short while price is falling. The more accurately you adjust your positions relative to market turning points, the more pips you'll bank. All of that is the result of devising a method that's grounded in market behavior, inefficiencies, probabilities, etc, and is what I would call trading strategy.

MM is about how much of your total equity you place at risk on any given position. You can use different staking systems like fixed dollar amount, fixed frac, fixed ratio, optimal-f, Martingale, anti-Martingale, d'Alembert, ...... whatever. All of these MM methods merely redistribute wins and losses; they can not in themselves provide an edge. Given an expectancy value from the trading strategy, MM largely addresses the question of: how much can I risk per trade to maximize my equity upside, while still keeping my worst case downside at a personally acceptable level? In other words, it's not trading specific; it could be applied equally well to any +EV game.

But like I said, everybody's definitions are different. Traders who (for example) see SL placement as part of their MM process can rightly claim that "MM" can deliver an edge.
  • #36
  • Dec 21, 2010 8:56pm Dec 21, 2010 8:56pm
Quoting hanover
The problem is that everybody's definition of "MM" is different. .
hey hanover.....thanks....... yes, that is what makes these types discussions so difficult to fully grasp just what is being said.....

thanks again.....h
to trade and code, keep both simple... no call to impress....h
  • #37
  • Dec 21, 2010 8:59pm Dec 21, 2010 8:59pm
Quoting hanover
The problem is that everybody's definition of "MM" is different. My current way of thinking, FWIW, is as follows:

At any point, you're either net long, short or flat. You can use entries and exits to achieve this, you can nedge, you can add or subtract positions by scaling in/out, ....... whatever. SLs or TPs likewise adjust your position, by returning from long or short to flat. All order types are merely vehicles to adjust your position. Your P/L is determined by how heavily net long you are while price is rising, or net short while price is...
Lemme simplify that for ya folks out there.

MM will not make you more money if you are always wrong because all they do is control how much money you lose/make. (hence the saying MM does not provide an edge)

A trading strategy(edge) dictates whether you are making +pips more often or -pips more often.

Before you even manage your profit or loss, you need an edge. Something that says you have more than 50% chance to beat the market. MM comes after that.
  • #38
  • Dec 21, 2010 9:06pm Dec 21, 2010 9:06pm
Quoting thelws
(hence the saying MM does not provide an edge)
.
//---

some of our russian friends seem to feel otherwise.....h

//----

http://championship.mql5.com/2010/en/news/14

//----

http://championship.mql5.com/2010/en/news/18
to trade and code, keep both simple... no call to impress....h
  • #39
  • Dec 21, 2010 9:29pm Dec 21, 2010 9:29pm
dear all,

thanks for FF coz i can post this.

i'm 25th yr old. i was hv xperiance for 3 years in stok n forex trading.
may be this is not the 1st time happen to me, but the situation now make me very2 not like b4. i always lost for more than 6 month . lost in trading and lost all my client. and now i lost my confidence. i was heared all the old says, but no one can make differend or can change . i'm still looser n almost lost my posision in work, but i was lost all in my life my the important things is i lost all my money too. n know i'm just like chicken without head. poor me...
i donk know why i posting this, but i know all of u , the old member and all players who was before or my be the new in this world trading have more xperiance n have good life now, but i know all of u hv situation like me before.
so i need ur xperiance how to start again n become more succesfull.

thanks a lot for ur sugesstion n comment. n thanks for this forum.
hope u all in successful trading.
GBU all.

best regards,

alexander (rio)
(indonesia)
  • #40
  • Dec 21, 2010 10:02pm Dec 21, 2010 10:02pm
Quoting hayseed
//---

some of our russian friends seem to feel otherwise.....h

//----

http://championship.mql5.com/2010/en/news/14

//----

http://championship.mql5.com/2010/en/news/18
absolutely incorrect assessment.

there was ABSOLUTELY NOTHING in any of that which i read that suggests MM has anything to do with edge.

these guys are all talking about an EA competition where the winner is whoever ends with the most money in the account. considering a MM strategy that doesn't change the lotsize and plays the same amount over and over is surely going to lose against a strat the compounds wins over time. this is why people put money into a savings account, after all. compounding. you can't compound cash in your wallet. there's no point playing a 0.01 lotsize with a $500,000 account.

edge is a traders shortcut of saying "i will be profitable" vs "i will fail". to have an edge is to be able to profit instead of lose.

the articles only made mention of what has already been discussed in this thread and every other thread that exists on the internet on MM... and that is to say that MM will help exploit an edge and profits. or to put it simply, MM = compounding but not to the point of being so aggressive the losses overwhelm the ability to maintain the lotsize and therefore your account drains despite having a winning strategy.

mm alone is nothing more than a safety net.

on one hand you either suck and good mm will help slow your bleeding and you will die a slow painful death, or your mm will suck and your trading will also suck and you will explode very quickly and be dead in the water.

on the other hand you could have be able to extract profit from trading and mm will help keep you in the game and can allow you to compound, or you will have a good trading strategy but your use of funds is utter crap and you explode your losses and are still dead in the water.

summary :

mm != edge, in any way shape or form.

bad trading + bad mm = death

bad trading + good mm = death

good trading + bad mm = death

good trading + mediocre mm = waste of time

good trading + good mm = profits

it really is as simple as that. i don't know why people even question this anymore.
Congratulations ScalaFX for coming out of the closet!
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