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Money Mangement, Do you take it serious?

  • #41
  • Aug 28, 2006 5:01pm Aug 28, 2006 5:01pm
Although it's important, the trade is the main important part.

I've got a simple system, where I trade at a level when 200pips can go against me, unless ofcourse I'm on 1 Lot, then I has to try to turn it around, keeps me in the game and easy to figure as calculation in my excel.

59% profitable, Average winning trade is £9.85, losing £11.92 at the moment ( Factor in £5 on the spread and it's bareable just )

Unless your the type of person that holds the trade until his SL or TP is hit regardless getting into all this indepth money management is abit pointless really.

My SL is a worst case, I normally prefer to bail ( normally correctly ) if I see it turning against me, and I never had a TP target, I may have a area but rarely hold for my target fully ( need to work on that )

KISS people KISS.
Nothing to it, but to do it!!! Stick to the plan FOOL!!!!
  • #42
  • Aug 28, 2006 5:10pm Aug 28, 2006 5:10pm
Quoting philmcgrew
I think a R:R of 6 is fantastic but most people that I meet simply make their target 6 times bigger than their loss and if you do that you're fooling yourself. I think risk and reward are absolutely critical but I often question how someone knows the market is going to a specific location.
I dont need to know where market is going because my sistem is tested, and 25% of trades are winners (RRR=6), so I have my edge and I am just following my rules
  • #43
  • Aug 28, 2006 5:10pm Aug 28, 2006 5:10pm
Quoting Turveyd
Although it's important, the trade is the main important part.

I've got a simple system, where I trade at a level when 200pips can go against me, unless ofcourse I'm on 1 Lot, then I has to try to turn it around, keeps me in the game and easy to figure as calculation in my excel.

59% profitable, Average winning trade is £9.85, losing £11.92 at the moment ( Factor in £5 on the spread and it's bareable just )

Unless your the type of person that holds the trade until his SL or TP is hit regardless getting into all this indepth money management is abit pointless really.

My SL is a worst case, I normally prefer to bail ( normally correctly ) if I see it turning against me, and I never had a TP target, I may have a area but rarely hold for my target fully ( need to work on that )

KISS people KISS.
If your targets and stops are not routinely hit then you should adjust them and your expectations (not to mention discipline)until they are. You can live well off of a 59% accuracy. Money management doesn't have to be complicated but it does have to be respected.
  • #44
  • Aug 28, 2006 5:16pm Aug 28, 2006 5:16pm
My stop is there, purely as worse case 17 - 20pips normally ( ie PC crashes, power goes down ) most of the time I exit before getting stopped, if only a point or 3 saved, it still helps.

I rarely place a limit order, except for if I leave a trade on, which is rare.


I keep hammering my account, waiting for a market to turn playing the wishing game, ( only 3 times last 2months ), if I can get outta that habit I'll be making good $$$'s this is where I need to tighten my money management skills really.
Nothing to it, but to do it!!! Stick to the plan FOOL!!!!
  • #45
  • Aug 28, 2006 5:47pm Aug 28, 2006 5:47pm
Quoting Darkstar
I personally risk 12.5% of my account on every trade. BUT I have a 90% win rate on 30pip stop/35-50 pip take profit trades. I also only trade 3-5 times per month so I need returns.
Heck, I taught my fighting oscar that trick years ago!!!! Sorry, just couldn't resist.

That's all I've ever said (too) often: develop a consistent system that makes pips, then increase lots. What do you expect? I am a rockin' scientist afterall!!

Good work DS.
  • #46
  • Aug 28, 2006 6:00pm Aug 28, 2006 6:00pm
Quoting Captain Piptastic
A probability distribution still applies to you.
I concede that there is no way to escape measurement, but your presuming to say that everything in the universe must order itself on a bell curve, which is clearly not the case.

The mistake your making is a trap that academics frequently fall into. By taking a measurement of a dataset and determining statistical probabilities, you are attempting to predict future outcomes mathmatically. There is a subtle difference with profound implications between the existing facts and the assumptions.

As an example, lets look at auto insurance. By examining a large pool of accident data, a statistician determines that red cars have a higher potentiality of being involved in an accident then any other colored car. This is an undisputable fact (given the dataset) and is grounds for charging drivers of red cars higher insurance premiums. BUT, the subtle fallacy was just perpetrated.

Does owning a red car actually make you more likely to be involved in an accident? No. People who are attracted to red cars may have a higher propencity to speed, but by no means will painting a safe driver's black car red "cause" him to alter his driving habits. Acording to statistical logic, that car now has an increased chance of being in an accident. The assumption is that the color red "causes" accidents.

Your doing the same thing when you take my stats and extrapolate a 5% probability of 2 consecutive loses. What causes those loses exactly? The bell curve of your data? It may be handy to evaluate options based on the potentiality of an outcome, but statistics do not CAUSE anything to happen. If it were that simple, you could look at any historical market activity, build a probabiility distribution and automagically make billions of dollars. Given that successful quants are outliers or the bell curve of trading, I wouldn't put that much faith in the statistical crystal ball.

Quoting Captain Piptastic
So then you don't risk 12.5% per trade?
No I still trade the same size, I just make it a point to get a breakeven stop in sooner and look for a lower profit target (35 as opposed to 45 or 50).
  • #47
  • Aug 28, 2006 6:03pm Aug 28, 2006 6:03pm
Quoting MoneyMa$ter
Heck, I taught my fighting oscar that trick years ago!!!! Sorry, just couldn't resist.
Touche'
  • #48
  • Aug 28, 2006 6:04pm Aug 28, 2006 6:04pm
Quoting kolachi
Just read my signature.
If you wish to go to the island of millionaires then you need to cross the occean full of sharks.You have only one boat and few tools with you to keep away these ferocious beings.
As long as you remain in the boat, you are safe no matter what you do while sitting in its limits and where you sit.It is your wish to use tools to keep away the animals or to drill holes in your boat.But one thing is sure if boat is lost then you and your dreams will get first wet with water and the water will be red with tears of repentence.

Just my humble words,

kolachi
I quite agree with you. My concern is that why people disregard a factor that can help them to survive.
  • #49
  • Aug 28, 2006 6:11pm Aug 28, 2006 6:11pm
Quoting Turveyd
... keeps me in the game and ...
Believe it or not, it's not a game. It's a business and if you own(ed) another business (say a retail business) you never accept to lose a single penny. To remain in business money management is an important tool that you should not ignore.
  • #50
  • Aug 28, 2006 6:44pm Aug 28, 2006 6:44pm
I have turned around my trading using MM as it has helped me to define my risk 1% per trade, which has then allowed me to determin where my S/L goes and how many lots i will trade.
It Also allowed me to take ownership of the Losses that eventuate and minimize the pyhc impact of being wrong. I never close a trade unless 1 of 2 conditions occur
A. it hits S/L
B. it reaches my P/T
With those rules in place i have started to turn my selfdestructing demo into a profitable one.
  • #51
  • Aug 28, 2006 7:07pm Aug 28, 2006 7:07pm
Quoting ademac
I have turned around my trading using MM as it has helped me to define my risk 1% per trade, which has then allowed me to determin where my S/L goes and how many lots i will trade.
It Also allowed me to take ownership of the Losses that eventuate and minimize the pyhc impact of being wrong. I never close a trade unless 1 of 2 conditions occur
A. it hits S/L
B. it reaches my P/T
With those rules in place i have started to turn my selfdestructing demo into a profitable one.
I wish you luck.
  • #52
  • Aug 28, 2006 7:12pm Aug 28, 2006 7:12pm
Quoting aparsai
Do you take these stuff serious?
Well aparsai, I think you now have a good idea of how many people take MM serious. I assume that you still have a free hand and both feet.
  • #53
  • Aug 28, 2006 7:21pm Aug 28, 2006 7:21pm
I agree with a lot that's said here, money management is key. But also, I'd like to point out that perhaps for a lot of people who take on too big of positions, even with a solid system that mathematically will make money in the long haul, a loss of a certain amount of capital could crush someone emotionally. Which of course can devastate their psyche, and lead them down the infamous path of emotional trading. Patience and rule following go out of the window. But that's not everybody.

With that said, there seems to be a lot of preaching going on. Forex is free market capitalism at it's finest, and as participants in this grand form of free will, we should not stray down any paths of riteousness. Education and demonstration on/of money management's effectiveness and place should definitely be pointed out so that each individual can make their own choice on risk tolerance.

I don't agree with or would ever risk %25 on a single trade, but I'll damn well cheer someone on with the balls to do so who can effectively do it.

People have the right to fail and to succeed by any means ethically possible.

PS: to answer the thread starter, I take it serioulsy. Let's make some money
  • #54
  • Aug 28, 2006 7:29pm Aug 28, 2006 7:29pm
Quoting philmcgrew
Well aparsai, I think you now have a good idea of how many people take MM serious. I assume that you still have a free hand and both feet.
  • #55
  • Aug 28, 2006 7:32pm Aug 28, 2006 7:32pm
Quoting theoldinout
...PS: to answer the thread starter, I take it serioulsy. Let's make some money
Thanks and I wish you the best.
  • #56
  • Aug 28, 2006 7:57pm Aug 28, 2006 7:57pm
Quoting Darkstar
I concede that there is no way to escape measurement, but your presuming to say that everything in the universe must order itself on a bell curve, which is clearly not the case.

The mistake your making is a trap that academics frequently fall into. By taking a measurement of a dataset and determining statistical probabilities, you are attempting to predict future outcomes mathmatically. There is a subtle difference with profound implications between the existing facts and the assumptions.

As an example, lets look at auto insurance. By examining a large pool of accident data, a statistician determines that red cars have a higher potentiality of being involved in an accident then any other colored car. This is an undisputable fact (given the dataset) and is grounds for charging drivers of red cars higher insurance premiums. BUT, the subtle fallacy was just perpetrated.

Does owning a red car actually make you more likely to be involved in an accident? No. People who are attracted to red cars may have a higher propencity to speed, but by no means will painting a safe driver's black car red "cause" him to alter his driving habits. Acording to statistical logic, that car now has an increased chance of being in an accident. The assumption is that the color red "causes" accidents.

Your doing the same thing when you take my stats and extrapolate a 5% probability of 2 consecutive loses. What causes those loses exactly? The bell curve of your data? It may be handy to evaluate options based on the potentiality of an outcome, but statistics do not CAUSE anything to happen. If it were that simple, you could look at any historical market activity, build a probabiility distribution and automagically make billions of dollars. Given that successful quants are outliers or the bell curve of trading, I wouldn't put that much faith in the statistical crystal ball.



No I still trade the same size, I just make it a point to get a breakeven stop in sooner and look for a lower profit target (35 as opposed to 45 or 50).
I've made no assumptions at all about cause. I don't need to. You already told me why you lose 10% of your trades.

Quote
The trades I DO manage to lose are the result of my own personal shortcomings; impatience, greed, fear, etc..

The "statistics" are based on what you have already done. Should things remain consistent I'm only extrapolating what is probable in the future. Your actions (that is after all what you attributing loss or win to) will determine where you "fall on the bell curve".

I will admit that our "confidence level" in these stats should be low. Why? Because I don't believe your dataset is large enough to be valid.
Secret Identity: Bill Sullivan
  • #57
  • Aug 28, 2006 8:12pm Aug 28, 2006 8:12pm
Quoting Captain Piptastic
The "statistics" are based on what you have already done. Should things remain consistent I'm only extrapolating what is probable in the future. Your actions (that is after all what you attributing loss or win to) will determine where you "fall on the bell curve".

I will admit that our "confidence level" in these stats should be low. Why? Because I don't believe your dataset is large enough to be valid.
Fair enough. I'll let you know if the mathmatical prediction ever pans out.
  • #58
  • Aug 28, 2006 8:25pm Aug 28, 2006 8:25pm
Quoting aparsai
Have you setup some money management rules for your trading?
You bet.
Quoting aparsai
What is your approach?
It depends on the strategy, but as a general rule I risk 3% per trade.
Quoting aparsai
Do you let a drawdown of more than 25% to your account?
I have in the past. I've done a 75% drawdown. Currently? Heck no. I'd shoot myself.
Quoting aparsai
What would you do if you face a 10% drawdown?
Depends if it's in my trading plan... if the system suffers that loss, but overall is successful, then I guess I do nothing and continue following my plan, because I trust my system.
Quoting aparsai
What percentage of your account do you risk per trade?
3%
Quoting aparsai
Do you enter a trade with a Risk Reward ratio of over 100%? What about a trade with a Risk Reward ratio of 50% to 100%?
You mean 1:1 or 1:2? 1:1 would need to be 51% or higher success rate.
Quoting aparsai
Do you calculate S/L, T/P, and Risk Reward ratio before entering a trade?
Yes. I have a spreadsheet that I plug my capital and risk amount in, and it automagically tells me how many units to risk. It's dandy.
Quoting aparsai
What would you do if your account grows by 10%?
Nothing. Why be emotional?
Quoting aparsai
What would you do if your account grows by 25% or more?
Nothing. Why be emotional?
Quoting aparsai
Do you take these stuff serious?
I want to be a pro working for myself in two years. I believe it will happen because I will succeed no matter what. I don't trade with "money I can afford to lose." Whoever invented that saying should be taken out back and beaten like a punk. So yes, I'm a tad serious... If you had a business, wouldn't you be?

Here, let me break it down for ya's:

I hear the newbies in the forums chatter boxing
Mr. Trend and DS got all the traders watching
I hear them jam japing bumping guns chasing crones
We ain't concerned with them bums we accumulating funds
They think we don't take our funds oh so serious
Until they see our accounts grow so furious.
See me in the new Benz cuz I'm oh so ballin'
Or a old school slab with the few wheels fallin'
We got em talkin' but really they ain't saying too much
Just speculating that money management is just a crutch.

Mr. Trend
  • #59
  • Aug 28, 2006 8:36pm Aug 28, 2006 8:36pm
Quoting Mr Trend

I hear the newbies in the forums chatter boxing
Mr. Trend and DS got all the traders watching
I hear them jam japing bumping guns chasing crones
We ain't concerned with them bums we accumulating funds
They think we don't take our funds oh so serious
Until they see our accounts grow so furious.
See me in the new Benz cuz I'm oh so ballin'
Or a old school slab with the few wheels fallin'
We got em talkin' but really they ain't saying too much
Just speculating that money management is just a crutch.

Wow, your my hero.
I dream, therefore I become.
  • #60
  • Aug 28, 2006 9:35pm Aug 28, 2006 9:35pm
Quoting Mr Trend
...

I hear the newbies in the forums chatter boxing
Mr. Trend and DS got all the traders watching
I hear them jam japing bumping guns chasing crones
We ain't concerned with them bums we accumulating funds
They think we don't take our funds oh so serious
Until they see our accounts grow so furious.
See me in the new Benz cuz I'm oh so ballin'
Or a old school slab with the few wheels fallin'
We got em talkin' but really they ain't saying too much
Just speculating that money management is just a crutch.
Mr. Trend,

You are fabulous.
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