How to avoid drawdown when you increase your position size?

What is unspoken and infered is that you never increase your market risk, even though you do increase the number of contracts traded.

There is no fear from increasing contract size, because you have a much larger equity base to weather any drawdowns, and it is a simple matter of refering to the Total Account column to determine the miniumum dollar amount required to trade a given # Contracts.

Hope this helps.

JJ
 
For the record, here is the same model using the performance bond required by most brokerages for the full size Hang Seng Index. As you can see, you can just plug in any performance bond required and the spreadsheet will calculate the rest.

Me personally, I'd look around for another index(s) to trade. Considering the amount of equity you're working with, you could get much better bang for your buck someplace else.

You would have substantially lower risk of significant drawdown, you would also make less on your winners, but that's OK, trading is about managing risk, not scoring big winners.

Regards,

JJ
 

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In my backtesting I find that growth rate is not linear to risk. If risk is doubled then growth rate increases by about 2.5 fold. I have not modeled this extensively. My point is doubling risk might have an unexpected effect on either drawdown and / or capital growth. Your modeling studies might show what to expect.
 

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Quote from JimmyJam:

Me personally, I'd look around for another index(s) to trade. Considering the amount of equity you're working with, you could get much better bang for your buck someplace else.

You would have substantially lower risk of significant drawdown, you would also make less on your winners, but that's OK, trading is about managing risk, not scoring big winners.

Regards,

JJ [/B]
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Thanks JJ.

Any suggestion on better index to trade?
 
Quote from Willleung:

Thanks JJ.

Any suggestion on better index to trade?
More...

Been a while, huh?

Depending on the hours you like to sleep:

S&P Emini, NASDAQ Emini, Dow Emini, DAX, DJ Euro STOXX 50, Euro Fx, 5 Year Note, QM (mini-Oil), etc., etc., etc.

Plenty of options where you get nice leverage without having to go all-in.

Happy Holidays,

JJ
 
Quote from sulli:

I know this is easier said then done - but I think you need to add an additional system that has a low correlation or negative correlation to your current system.

IMO, This is the best solution to minimize overall drawdown.

http://www.elitetrader.com/vb/showthread.php?s=&threadid=33654
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Man sulli, I was looking for that thread, thanks! (I first saw it late one nite).

To run multiple systems the OP is still going to have to trade an index with a lessor risk level than the HSI, that's why I mentioned those other futs.

Regards,

JJ
 
You can keep your risk low by doing a long term trade and add multiple positions. Only add a position once the stop for the previous position is in the money. When you lose, your losses are small. When you win...you can win really big.
 
Quote from JimmyJam:

For the record, here is the same model using the performance bond required by most brokerages for the full size Hang Seng Index. As you can see, you can just plug in any performance bond required and the spreadsheet will calculate the rest.

Me personally, I'd look around for another index(s) to trade. Considering the amount of equity you're working with, you could get much better bang for your buck someplace else.

You would have substantially lower risk of significant drawdown, you would also make less on your winners, but that's OK, trading is about managing risk, not scoring big winners.

Regards,

JJ
More...

Thx for the spreadsheet JJ - graphically that sums shows what you typed very well. Thank you.

Kind regards,
MK
 
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