Ex-institutional currency trader advises newbies ...

Quote from DrEvil:

I might not have explained clealy. What this guy was suggesting:

say for a winning streak of 5 successful consecutive trades:

trade 1: 1 contract
trade 2: 2 contracts
trade 3: 4 contracts
trade 4: 8 contracts
trade 5: 16 contracts

so as you see, trade 6 (or whatever, because eventually a losing trade has to come) will be 32 contracts. i.e you have largest position size on when you hit a losing trade. Conversely, after a streak of losers, you have your smallest position on.

To my mind, only someone who has never traded real money would suggest such a strategy which is why I was surprised to hear this from a supposed ex-institutional trader.
More...

There is another possibility you have to consider. That you do not understand how professionals trade even if they explain it to you. If you risk a constant 1% at every stage to make 1%, for example, then after trade 5 the bankroll is increased by 5% but you lose only 1% at trade 6, although you have 32 contracts. The contracts are increased in an effort to try to capture the winning move as fast as possible.

This is a technique of essentially moving the stop and target tighter at each stage while keeping risk and reward constant.

Conversely, when you have losing trades, you decrease the contracts but you increase the risk per trade so that when things turn your way, you recover the losses with the least contracts.

You need balls to trade like this and big money. This method by itself can become an edge if you know what you are doing. Most people don't.
 
I see exaggeration in that example, but idea behind it contains significant wisdom.

I myself always increase size when in a winning streak and cut it when in a losing one.

I see it as one of the key elements of correct money/risk management.
 
Double up your position everytime you win? that is stupid. double position = double risk!

If your Risk/Reward is 3/6% and you double the position you are now risking is 6% of equity on the next trade, and 12% on the next, etc.. You are guaranteed to blowup.
 
Bullcrap...

but...Reminiscences of a Stock Operator was a great read...

Quote from DrEvil:

I recently had occassion to hear a talk by an ex-institutional currency trader who was talking on trading psychology. Anyway after rambling on for 28 minutes about how much money he made for his bank, he went on to reveal one of his secrets to all the eager newbies.

He emphasised the importance of pushing your winning streak and said that after each winning trade he would double up his position size and keep doing this until he hit a loser and then every subsequent loser thereafter he would half his size and keep doing it until he hit a winner.

I now question whether this joker has actually ever traded or was deliberately giving out terrible advice.
More...
 
Quote from bln:

Double up your position everytime you win? that is stupid. double position = double risk!

If your Risk/Reward is 3/6% and you double the position you are now risking is 6% of equity on the next trade, and 12% on the next, etc.. You are guaranteed to blowup.
More...

You can double up your position and retain the same risk percent by moving the stops. Many noobs do not understand how this is done. This paper has the formulas you can use for both point and percentage R:R to calculate stops for constant risk percent when you change position size:

http://www.priceactionlab.com/Literature/PositionSizing.pdf
 
this trader must be discretionary. And if so, psychology is important part of decisionmaking..

If method captures major swings, then size is not an issue.

Why would someone trade years and years 70% win system. Answer is because it cant be scaled up.

So, if capturing major swings only then you set size to maximize YOUR performance. 1% risk trading discretionary,l you lose attentioon too quick as it is hard work.

I like reinvesting all profits in next trade. That keeps me alert enough not to get mediocre.
 
One cannot double up size every time simply because of the margin requirements (assuming size on the first trade in the streak was already decent).

With one exception: if every winning trades yields enough to seriously increase account equity.

But in that case doubling the size will not make the risk in percentage terms too big, so that still sounds like a solid approach.
 
In the movie floored one of the ex floor guys said the same thing.

I'm paraphrasing but he said that most people didn't get this game - when your right bet MORE
 
You must log in or register to reply here.
Back
Top