5min/1h TrendFollowing on ESTX50, SMI, & GBL

Quote from Vince1:

I would calculate the leverage as the ratio of the economic value of the positions to the available capital. Say 3 long ESTX50:

3 * 3991 * 10 = 119,730 euros

On a 20k euros account this is a 6:1 leverage (assuming no offsetting position).
On a directional trade, it is not considered conservative trading...

Now, as Soros said, leverage is a two edged sword. It works both on the risk side and the return side.

If, on the risk side, you have a money management plan to handle a loosing streak you'll be fine++
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So you think 6:1 is too much. What's typical among successful hedgefunds? Eurostoxx50 isn't that volatile, it's crawling most of the times, so 6:1 "feels" ok to me. (On the other hand, even 1 contract on GBL "feels" like too much risk).

Anyway, admittedly I don't seem to have a rock-solid money management. I rather work with a few rules-of-thumb, which work OK for me so far.
 
Quote from KS96:

So you think 6:1 is too much. What's typical among successful hedgefunds?
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I know 6:1 is too much for me. A 0.50% adverse move in ESTX50 will cause a 3.00% drop in equity. That's just 20 ticks.

Of course it works both ways. However, leveraged directional funds with high returns invariably exhibit high downside volatility. See Schindler Trading (before April 2005) and Matador Fund.

Did you read the Monroe Trout interview in the first Market Wizards book? I found his approach to risk management simple and elegant - and conservative, hence the low downside volatility of Trout Trading++
 
Quote from KS96:

We popped nicely, and i see an inverse H&S (if H&S exist :D after all) with a neckline at 4019, and min target up to 4052.
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nice call!!

great trade KS
 
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