Op the topic of Money management:
I have been meaning to write this to clear out my thoughts but more importantly to understand what returns (as a percentage of account) can a trader achieve using various methods specially PVSRA based position building as one of the methods.
lets assume you have big enough account (say 100k+). So you can trade mini lots comfortably. Question is how should you calculate what size to trade for each part (for simplicity i am assuming each part is equal). I have seen many discussions about proper money management but dont think we addressed this directly.
Suppose your goal is to maximize the returns (of course 1st goal is not to blow up your account).
From TAH's excellent trading history using PVSRA, i can see he can average 3000 pips per week. On the other hand, his current drawdown is approximately 13000 pips (total ~70 parts with ~200pips in loss on avg). So assuming you want to keep it safe and account for 3 times that (~40000 pips), we need to trade in size that 40000 pips dont blow up our account.
That means our account should allow ~200 parts (3x70) with each carrying 200 pips in loss. Assuming we want to use 10 times leverage (again safety wise - i know some brokers do allow 100 or more leverage), that means size of each part S should be
200 * (S / 10 + 200 pips * S) = Account Size
-> S = AS/24
And your average weekly return will be S * 3000 pips = ~1.25% of your AS -> 65% annual return
(i am approximating pips to 1 bps here).
Can you guys advice if i am looking at this in too complicated manner or am getting it totally wrong somehow.
Thank you everyone
I have been meaning to write this to clear out my thoughts but more importantly to understand what returns (as a percentage of account) can a trader achieve using various methods specially PVSRA based position building as one of the methods.
lets assume you have big enough account (say 100k+). So you can trade mini lots comfortably. Question is how should you calculate what size to trade for each part (for simplicity i am assuming each part is equal). I have seen many discussions about proper money management but dont think we addressed this directly.
Suppose your goal is to maximize the returns (of course 1st goal is not to blow up your account).
From TAH's excellent trading history using PVSRA, i can see he can average 3000 pips per week. On the other hand, his current drawdown is approximately 13000 pips (total ~70 parts with ~200pips in loss on avg). So assuming you want to keep it safe and account for 3 times that (~40000 pips), we need to trade in size that 40000 pips dont blow up our account.
That means our account should allow ~200 parts (3x70) with each carrying 200 pips in loss. Assuming we want to use 10 times leverage (again safety wise - i know some brokers do allow 100 or more leverage), that means size of each part S should be
200 * (S / 10 + 200 pips * S) = Account Size
-> S = AS/24
And your average weekly return will be S * 3000 pips = ~1.25% of your AS -> 65% annual return
(i am approximating pips to 1 bps here).
Can you guys advice if i am looking at this in too complicated manner or am getting it totally wrong somehow.
Thank you everyone
Think : Trade : Live Life
-tah
