Do you consider money management an edge?

[LEAPup]

Again, you can have THE money management system. If you have no edge, you will blow up. It will be slower at least, if you have THE money management system. Slow, and painful...

 

[jajuanm2]

yes, a good edge with no money management will not allow you to build any wealth.

 

[NoDoji]

Quote from LEAPup:

Again, you can have THE money management system. If you have no edge, you will blow up. It will be slower at least, if you have THE money management system. Slow, and painful...

If you have a 50% win rate (no edge), but target twice the profit of your stop loss on each trade, how is that not a money management edge?

Geez proved this in his thread here in 2009 and I followed his live calls with entries, stops and targets for over a year.

 

[ivanbaj]

Quote from NoDoji:

If you have a 50% win rate (no edge), but target twice the profit of your stop loss on each trade, how is that not a money management edge?

Geez proved this in his thread here in 2009 and I followed his live calls with entries, stops and targets for over a year.

Being able to hit 2:1 with 50% accuracy is an edge.

50% with 1:1 is a wash.

P.S. I guess the expectancy is important not the 50% of success.

I think 50% with 2:1 is = to 75% for 1:1. If you can hit 2:1 with 50% then it means that 75% of the trades you can guess in what direction the price will move from the current price to -10 or + 10 ticks or what ever your 1 is.

You see 50% looks easy and 75% looks tough but they are the same in your case.

Unless there is a good reason that guessing that the price will move to +20 before it goes to -10 with 50% accuracy is easer than guessing that the price will go to +10 before it goes to -10 with 75% accuracy.

 

[Random.Capital]

Quote from LeeD:

Do you consider money management (a part of) your trading edge?

Money management cannot be separated from the trading strategy - it isn't a separate thing - so the answer is yes, absolutely.

 

[Random.Capital]

Quote from LEAPup:

"Even the best Money Management is worthless without an edge. Go to Las Vegas with your best money management system, and no edge, see what you come up with."

The only "edges" in Vegas come from breaking the law. The "best money management system" for Vegas is to not go, period.

Either that's a terrible analogy, or he's making a deeper comment than some might think.

 

[gurucandidate]

I concur with an earlier poster that money management is not an edge.

Money management is a useful tool and if it is properly applied leads to an advantage in the survival game.

Let's define what is an edge in trading.


Edge is an exploitable condition, an advantage, that

other participants of that trade can not benefit from.


We would have to break down a trade to see what kind of conditions (legal or not)would benefit us and not others.

Having inside in formation may or may not be an edge. For a skilled person seeing a big book of order flow may be. Having a valid method that is not widely used can be (a unique algo backed up with good equipment may be an edge).

In floor trading commodities being liked often lead to an edge over traders who were not liked because one could enter transactions they could not.

Regards,

GC

 

[LeeD]

Quote from Random.Capital:

The only "edges" in Vegas come from breaking the law. The "best money management system" for Vegas is to not go, period.

That's not entirely true. From wikipedia on card counting:

Blackjack played with a perfect basic strategy typically offers a house edge of less than 0.5%, but a typical card counter who ranges his bets appropriately in a game with six decks will have an advantage of approximately 1% over the casino. Advantages of up to 2.5% are possible at normal penetrations from counting 6-deck Spanish 21, for the S17 or H17 with redoubling games.

...

A myth that some casinos propagate is that card counting is illegal in the United States. This myth is popularized by the Oscar-winning movie Rain Man. Card counting without an outside device is completely legal. There are no provisions in the rules of blackjack or United States law that prohibit card counting. Despite this, casinos still offer blackjack as a game knowing that a skilled player will have an advantage over the house. Casinos believe they avoid losing money by preventing card counters from playing.

And on money management from the same article:

At a table where a player makes a $100 average bet, a 1% advantage means a player will win an average $1 per hand. This translates into an average hourly winning of $50 if the player is dealt 50 hands per hour.

With typical bet ranging and typical Las Vegas six-deck rules, a player whose strategy yields an average profit of $50 per hour will likely face a standard deviation in the neighborhood of $1,400 per hour. Therefore, it is highly advisable for counters to set aside a large dedicated bankroll; one popular rule of thumb dictates a bankroll of 100 times the maximum bet per hand.

 

[LeeD]

Hi NoDoji, thanks for the swift reply at the start of the thread.

Quote from NoDoji:

If you have a 50% win rate (no edge), but target twice the profit of your stop loss on each trade, how is that not a money management edge?

I think there is no argument that being able to set a target twice the size of the stop-loss and still have 50% win rate is an edge. The argument is whether this is money management as opposed to setup (I trade only when I can set the target twice the stop-loss) or possibly trade management (I patiently wait till the gain on a trade reaches double the stop-loss.)

 

[LEAPup]

Quote from NoDoji:

If you have a 50% win rate (no edge), but target twice the profit of your stop loss on each trade, how is that not a money management edge?

Geez proved this in his thread here in 2009 and I followed his live calls with entries, stops and targets for over a year.

Now ET Mom, that actually IS an edge.

We still love you though!