Let's get this out of the way ahead of time: To all those who wish to bash and rant please feel free. This post is intended to help anyone who is interested in appreciating and learning the fine art of money management for trading futures. Year to date, my account is up approximately 680% and I expect it to be up well over 1000% by years end so if you find it necessary to criticize my methods you are more than welcome to do so. Enjoy.
I use a double down strategy under certain situations (I would have to go into great length to explain what these situations are...perhaps another day), and it's something that I have found to be very powerful if it is used correctly. Now it's time to take that strategy one step further. I have 2 futures (actually 3 if you count IB) trading accounts and what I've found is if I have to use the DD 3 is usually the magic number so consider the following scenario:
All of these numbers are hypothetical and simplified for obvious reasons. In account Number 1 I buy 1 contract and lose $100. I buy 2 contracts and lose $200, for a total loss of $300. I buy 4 contracts and make $800 for a total profit of $500. In this account I had to work off the $300 loss before I started showing a profit. Now consider the following:
In account Number 2 I don't begin trading until I get to my 3rd DD trade in account Number 1. At this point, I have the option of going with 4 contracts (the current amount in account number 1) or 1 contract. This decision would be based on a number of things, but mainly on the look of the chart and the time of day.
The reason I like this strategy is based on the following....have you ever bought a double bottom, which is a bullish setup, and see it trade to a triple bottom, or perhaps a falling wedge, or even a falling channel/rectange? We can't possibly know ahead of time which setup will appear but with the magic of money management, we don't have to. If I'm up to my 3rd DD on account Number 1 and I see a falling wedge in the works then I'm going with 4 contracts in account Number 2. However, if the setup has a lower probability than a falling wedge then I can choose any amount between 1 and 4 contracts.<p>
A strategy is not a good strategy unless you consider and appreciate the weaknesses of the strategy. You could lose on the 3rd DD in account Number 1 AND account Number 2, which compounds your losses, especially if you take 4 contracts in the 2nd account. But, if you have any confidence in your ability as a trader then this is a very, very powerful strategy!
Trade on and may all your trades be good ones, even the losers!
I use a double down strategy under certain situations (I would have to go into great length to explain what these situations are...perhaps another day), and it's something that I have found to be very powerful if it is used correctly. Now it's time to take that strategy one step further. I have 2 futures (actually 3 if you count IB) trading accounts and what I've found is if I have to use the DD 3 is usually the magic number so consider the following scenario:
All of these numbers are hypothetical and simplified for obvious reasons. In account Number 1 I buy 1 contract and lose $100. I buy 2 contracts and lose $200, for a total loss of $300. I buy 4 contracts and make $800 for a total profit of $500. In this account I had to work off the $300 loss before I started showing a profit. Now consider the following:
In account Number 2 I don't begin trading until I get to my 3rd DD trade in account Number 1. At this point, I have the option of going with 4 contracts (the current amount in account number 1) or 1 contract. This decision would be based on a number of things, but mainly on the look of the chart and the time of day.
The reason I like this strategy is based on the following....have you ever bought a double bottom, which is a bullish setup, and see it trade to a triple bottom, or perhaps a falling wedge, or even a falling channel/rectange? We can't possibly know ahead of time which setup will appear but with the magic of money management, we don't have to. If I'm up to my 3rd DD on account Number 1 and I see a falling wedge in the works then I'm going with 4 contracts in account Number 2. However, if the setup has a lower probability than a falling wedge then I can choose any amount between 1 and 4 contracts.<p>
A strategy is not a good strategy unless you consider and appreciate the weaknesses of the strategy. You could lose on the 3rd DD in account Number 1 AND account Number 2, which compounds your losses, especially if you take 4 contracts in the 2nd account. But, if you have any confidence in your ability as a trader then this is a very, very powerful strategy!
Trade on and may all your trades be good ones, even the losers!
