Quoting miscon777DislikedAdaptrade looks brilliant... haven't started the demo yet, but the articles alone are excellent - looks like just about everything you could want to know about money management, all in one place.
Decided to play a bit with the fixed fractional thing... whipped up a little spreadsheet to calculate lots required, balance growth, etc., at 25% and 33% success and 1:4 / 1:3 RRs. I made it fairly easy to alter so you can play around with it yourself - just change the blue fields in the first row of each sheet to match your system / account.
Once again, the actual $ balances shown at the bottom are not realistic... Just to make things fast and easy, to effect 25% success I just logged 3 losing trades followed by a single winning trade, and then repeated the pattern 25 times (100 total trades). This type of regular repitition would never happen in reality, and whatever patterns of wins and losses happened would completely change the running balance, and thus all the rest of the figures (most importantly, lots bought/sold per entry to achieve desired fractional loss). Same thing with the 33% Success shown on Sheet 2 - just two losers followed by one winner, repeated 33 times (99 trades).
I used a 1 pip = $1 dollar system (1:200 leverage, if I'm not mistaken), because 1:100 leverage required lot sizes of less than 1 (0.7, etc), and I don't believe that brokers allow for fractional lots. Perhaps someone can confirm or deny this?
You could easily use this to track your own trading to determine lot sizes on a running basis... which if I guess correctly, is just one of the features that Adaptrade's software would provide. Phil, perhaps you could fill us in?
Anyway, just playing around... let me know if I bungled any computations herein.
-miscon777Ignored
Mike has written a series of great articles. They can be found by googling ""breakout futures" and then clicking free newsletter. I have read his work for quite some time before it occured to me that he was the author of the software as well.
Thank you for the work you put in the spreadsheet, it certainly proves your point about R:R and win%.
DS,
Thanks for your work as well. It's enjoyable to participate in a post as important as this one. One thing you didn't cover is the "D" word....drawdown. In most cases, profit and position size is severely cramped when you show respect for drawdown. For a typical system that I use the best fixed ratio independent of drawdown is around 10% of my account. When i limit drawdown to something reasonable like 20-30%, the fixed ratio drops to around 3%.
There are various money management algorithms which increase your fixed fraction (% account risked) as your win % goes up. And, this is logical...the more you consistently win, the more you should risk.
Phil