Can money management alone create any edge?

Quote from sonnet:

I remember 8 years ago when i first started learning about trading. My god, the trading books are hidious and so filled with detremental information, If anyone asks me i tell them to forget learning via books exept perhaps 3 or so exeptions.

One of the myths that is so hurful to the novice is the one mentioned in this thread.

"you can win just with money management!"

OH what a laugh. THey run these cockeyed simulations pearing deep into the PAST and get results that do not factor in the slippage, commision, ect, ie the vig.

Then, there is stuff like "keep your stop at a logical point, just below resistance".

Haha. "resistance?" right. wonderful advice as it maximizes the floor trader/market makers take, keeps the brokerages safe and with much churning, and allows the retail trader to bleed his account with all of about 0 chance of closing the account with a profit.


Think of all the failed traders who then think "well if i market stuff to new traders maybe i can be made whole" and u have the "education market" for trading, or at least 95% of it.

I think more money has been lost post bubble with all the momentum traders and the flawed techniques they learned than was actually made in
the bubble.
More...

Very true.
Though better hush up. Your 5% profitable traders absolutely need the other 95% kind in order to stay in business.
:D
 
If it's truly a 50/50 system with NO restrictions (no table limits (or liquidity equivalents)), then a simple martingale system (in leu of MM) should be able to "beat" it.
(obviously not directly applicable to markets, but a fun idea nevertheless)
 
Quote from MAD10:

If it's truly a 50/50 system with NO restrictions (no table limits (or liquidity equivalents)), then a simple martingale system (in leu of MM) should be able to "beat" it.
(obviously not directly applicable to markets, but a fun idea nevertheless)
More...
Only if you have infinite pockets, in which case, why even bother?

nitro
 
Quote from Mike805:

Well, my "edge" is my intuition - I don't really think of it as an edge though - more of a feel, a combo of how much confidence and potential I percieve in any market move. This changes every day as does my money management.

For example, I know that a stock I trade might take me $.XX into the negative before it turns and I also know that it can move a certain amount in a day.

I risked .50 for the trade and I know it could easily go 1pt plus in my direction. If it is hanging out -.30 from my entry, sometimes I'll cut it if nothing is happening, sometimes I'll wait it out. It really depends.

Overall though, I don't think Money management on its own can create a profitable strategy, but I do think that knowing how to excersize proper money management when a trade moves in your direction will make you profitable and hence is the most important aspect.

Test the water with a test size position and add if the move continues (press the winners) but never go beyond a certain monetary stop for any trade no matter the scale.

Anyway, this stuff is all personal risk tolerance and cannot really be quantified IMO.

Mike
More...

If it's disretion... it's called risk tolerant for me...
 
Well... I have to agree with nitro... and there's not much to add to his "vague" posts...

Though, as a tester and a researcher... I have not found a "significant" Money Management" model, which overcomes an obvious (in terms of statistics...) bad systme that MM can add value to other than curve fitting the "Positive Flaws".

...

... To make things easier for all everyone... I'm still waiting for a MM model that would make a 50/50 (1:1) coin flippin conditioned MM model that can turn profitable. For a fair sake, 100,000 spins per 1,000,000 spin on Monte Carlo and having 90+% confidence level.

I've never came across one and looking for one. If I did come up with one... I'll be a "billionaire" and share it with you...

If you ever do... post it here and I'll test it on random, ES, TY and NQ with 20+ year intraday data using my C# program...
 
I would bet that not *needing* to make money is a terrific predictor for making money as a trader.


Quote from angelitazul:

He found a better system which increased the odds of 50/50 in his favour and made him even more money. He's a multimillionaire trader who had nothing to do so our top Chicago boss hired him as our new boss cuz the old boss (London boss) is going to Hawaii to set up his own hedge fund!!
More...
 
Quote from trade4succes:

I would bet that not *needing* to make money is a terrific predictor for making money as a trader.
More...
There is no greater truth than that.

However, when you have tons of money, it is not whether you can make money or not (trading or otherwise) but whether you can beat buy and hold or some limiting case of that.

nitro
 
You must log in or register to reply here.
Back
Top