Hi Electric,
OK, so your cash stash in your main account provides your backup liquidity. And that's earning 2.3%...unleveraged by necessity. But I'm still unclear about how you know (or estimate) just how much your three pairs, traded together, can draw down. That will drive your Sharpe ratio, which both in theory and practice, will be important in a couple of years in trying to attract money.
Where does 17.1% come from? Did I miss something? Was it in the 'scale trading' approach? I'm assuming that's the drawdown you've seen to date, in five weeks? As currencies tend to move in large swings (trends), this may not be representative, or a good 'risk of ruin' basis. Yes, I'm aware that your hypothesis is that you can capture more in the short term than you'll be drawing down in the long term, but it would really pay to know what that could, in a worst case scenario, be. Any investor might tolerate a 17% drawdown, but at 25% or 30%, you'll probably see wholesale liquidation. So you will be taking losses to cover positions and redeem investments. Clearly, this you don't want. Typically, you'd take this max drawdown into consideration when figuring the proper amount of leverage to strike a balance between drawdown, profitability, and likelihood of blowing out. These are probably some important numbers to collect and monitor. Serious money comes typically with a three year track record. Your careful recordkeeping as well as your OandA statements should go a long way as that time comes.
I apologize for jumping around a bit here, but I'm responding to a number of differnet posts of yours....
I'd encourage you to continue your work and recordkeeping. Don't expect outside money so soon. Also, don't be disappointed that hundreds of traders don't get this or follow this. I've seen it numerous times. Give everyone the exact same system, and 1 out of 10 will replicate your results. Sure, the Turtles did it, but they were forced to be very disciplined because they were also given the money to trade. Besides, many lurkers are reading and benefitting from your ideas.
Finally, here's an idea for consideration: ideally, you will have positions on 100% of the time to earn an average of say 3% unleveraged. At 50:1, that's going to yield 150% on your initial investment each year. Now dial it down to accomodate some risk, and you get your 25% return, or so.
We all know that leverage cuts both ways. A 3% loss can make your year flat. More can wipe you out. Being in the market, in theory, 100% of the time for a year, to earn 3% seems to expose you to a lot of other risks. Yes, you are diversifying among several pairs, but I still think there's risk, though not as much.
Can you devise a way to make that 3% in a directional move in, say a week's time, then take the rest of the year off? That has a certain ring to it, wouldn't you say?
OK, so your cash stash in your main account provides your backup liquidity. And that's earning 2.3%...unleveraged by necessity. But I'm still unclear about how you know (or estimate) just how much your three pairs, traded together, can draw down. That will drive your Sharpe ratio, which both in theory and practice, will be important in a couple of years in trying to attract money.
Where does 17.1% come from? Did I miss something? Was it in the 'scale trading' approach? I'm assuming that's the drawdown you've seen to date, in five weeks? As currencies tend to move in large swings (trends), this may not be representative, or a good 'risk of ruin' basis. Yes, I'm aware that your hypothesis is that you can capture more in the short term than you'll be drawing down in the long term, but it would really pay to know what that could, in a worst case scenario, be. Any investor might tolerate a 17% drawdown, but at 25% or 30%, you'll probably see wholesale liquidation. So you will be taking losses to cover positions and redeem investments. Clearly, this you don't want. Typically, you'd take this max drawdown into consideration when figuring the proper amount of leverage to strike a balance between drawdown, profitability, and likelihood of blowing out. These are probably some important numbers to collect and monitor. Serious money comes typically with a three year track record. Your careful recordkeeping as well as your OandA statements should go a long way as that time comes.
I apologize for jumping around a bit here, but I'm responding to a number of differnet posts of yours....
I'd encourage you to continue your work and recordkeeping. Don't expect outside money so soon. Also, don't be disappointed that hundreds of traders don't get this or follow this. I've seen it numerous times. Give everyone the exact same system, and 1 out of 10 will replicate your results. Sure, the Turtles did it, but they were forced to be very disciplined because they were also given the money to trade. Besides, many lurkers are reading and benefitting from your ideas.
Finally, here's an idea for consideration: ideally, you will have positions on 100% of the time to earn an average of say 3% unleveraged. At 50:1, that's going to yield 150% on your initial investment each year. Now dial it down to accomodate some risk, and you get your 25% return, or so.
We all know that leverage cuts both ways. A 3% loss can make your year flat. More can wipe you out. Being in the market, in theory, 100% of the time for a year, to earn 3% seems to expose you to a lot of other risks. Yes, you are diversifying among several pairs, but I still think there's risk, though not as much.
Can you devise a way to make that 3% in a directional move in, say a week's time, then take the rest of the year off? That has a certain ring to it, wouldn't you say?
