no.
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Can money management alone create any edge?
- Thread starter Ricter
- Start date
It doesn't work, genius.
Quote from oktiri:
sure it can,
If at a certain point in time, the instrument you're trading has a 50 % percent chance of going up and a 50 % chance of going down, then a moeny management will help you create an "edge" out of nothing..,,,
you just have to set your loss limit less than the average "gain" when the instrument is riding up and down,
an exemple for the low intelligence folks posting on ET.
Supposes the DOW has an average movement of 30 points per day either up or down.
if you set your loss limit to 10 points...everytime the dow is riding up , you'' ll make on average 30.
everytime it's riding down you'll lose on average 10
This of course suppose a pretty trendy dow, and it's the case when we're either in a bull or a bear market...this strategy is not viable for a sideways market (like the last couple of days)
but this is only a "primitve" example of how money management can be applied to create an edge ! (van tharp book has some pretty decent insights on this in his book)
and let me reiterate my philosphy in life.
TA is astrology applied to markets
daytraders are academic / professional losers
Good luck to you !
Quote from science_trader:
The thing is a trading system will always die one day, and it's easier to see it doesn't work anymore with a 65% winning rate than it is with a 25%. With such a low winning rate, it can take time before you can say that your system isn't reliable anymore. Ans as you say it, it's a psychological factor.
Point taken.
Personally, anything below 40% is too low psychologically. And, as they say, the largest drawdown is always ahead of you. A drawdown of 10 trades x $200 each is tougher to deal with than 2 trades x $1000 each (at least for me).
However, I can't help but think a 25% system would show the same deterioration signs as a 75% system. You should see a deviation from historical results the same way with either system. Assuming they have the same expectancy and you, as a trader, don't care about the win rate, implimentation, trading, and monitoring of one should be no different than the other.
In your case, only magic will work well.Quote from Ricter:
Say you're operating in a 50/50 environment, are there money management methods that can keep you in the black?
BTW What is "MONEY MANAGEMENT"? This is one of fuzziest pop terms on ET. In fact, it means nothing at all unless you give it a precise meaning.
Quote from hanseng1:
However, I can't help but think a 25% system would show the same deterioration signs as a 75% system. You should see a deviation from historical results the same way with either system.
They will show the same degradation, but one needs more time to be statistically identified as such. If my backtesting says that historically my 65% system has already showed a string of 10 losses, after a string of 15-20 losses, I would start wondering if something bad is happening to me. With a 25% system, that longest string should become 36. I would then need to wait about 55 losses to have the same 'certainty'.
It's even more difficult (and especially psychologically) if you don't just consider string of consecutive losses, but samples with a high percentage of losses (like 20 out of 30 for example).
This is a trick question what style are you trading? Do you take overnights? What kind of size? You canât day trade with a 50/50 payout. Itâs not worth the time and money management wonât matter because you will have to do crazy things to make money. It also comes down to commissions. Now if you have a good commission along with a good payout yes money management can help a lot. Also you are the money management method there is not proven study that will make you make money if you do this and do that.Quote from Ricter:
Say you're operating in a 50/50 environment, are there money management methods that can keep you in the black?