How to never get an account wiped out?

Quote from fearless9:

Dont leave a dime more in your account than is required as somehow you will lose it. [/B]
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But if you want to increase position size and keep each max loss the same % of account size it will not be possible.

Unless you want to consider the money you took out still part of the account but that is a little strange.

I do agree with your point a lot of money in the account could be a temptation to trade too large a position size.
 
Quote from monee:

But if you want to increase position size and keep each max loss the same % of account size it will not be possible.
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If you're trading futures, you really don't need much more than minimum margin in the account, what is the rest for? Get a cash account to sweep into, leave just enough to trade a an increased proportional size (maybe a bit more for wiggle room and "sure things") and consider % risk out of total funds. Keep your accounts growing in the same proportion and you will end up taking a consistent percentage of winnings out as you scale up.
 
Quote from gg12:

Independent of your strategy money management is most critical to a successful trader.

What about designing a structure which only works on percentages?

Once a loss occurs the account is for example at 50%. After the next loss it's 25% (then 12.5% ....). But never 0.

If there is a winning streak the account will scale up nicely.

As long there is an edge during the livetime of the account (which is theoretically endless) the account will grow anyway.

What do you think?
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It's probably the craziest thing that people do!

Firstly, they come up with a half baked idea of a strategy.

Secondly, they try to fit it into a too short of a time frame.

Thirdly, they try to apply money management to the above mentioned, from a severely underfunded account?

:confused:
 
I had suffer a $78k HKD drawdown since my account equity peak in Mid-Nov, I made back $62k (ie, 80% of the DD) after Christmas, then I am down $15k (30% of the DD); net result? $31k to go (39.7% of the DD). Risk vs Return is about 4:1

If I have reduce my position size after the drawdown let's say from 3 to 2, then I would have made $41.3k, then lose $10k, $46.7k to go.

Maintain your size, that's the only way to go.



Regarding increasing your size, remember you had profited from let's say 2 contracts and you will then suffer loss from 3...

Here are two things you can do:

1. Increase your capital (smaller DD vs account size, with a positive expectancy in your system you should be able to do this as time goes on), or

2. Revise your system, taking on less risk should result in higher Profit Factor (smaller loss vs gain)

The above two measures should keep your DD small and allow you to recover from that faster. I am doing both.



78% Drawdown, I couldn't imagine, I would have jump off a building...
 
monee/frearkess9

Rather than leaving a dime more in my account than is required I have devided to leave all proceeds in my account, because

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I didn't put in a dime more than I can affort to loose.
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At some point of time, applying the Kelly system,

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the account will be grown very big.
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There is no time guarantee for that, but currently:
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I have more time than money
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and aim to act with patience and no greed.

I you want to increase position size and keep each max loss the same % of account size! That %-Risk/Investment depends only on my edge i.e.
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If I risk 25% of my account in each trade I need an edge of 62.5%
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And yes I want to consider the money, the hole account as growth resource. Every Dollar is needed at any time! All assets are needed, have to contribute and are therefore are at full risk.

There should not be a temptation to trade with too large absolut position size. But you have seen, I am still trading too big and too unpredictable.
 
Hydroblunt

Why not using leverage?
If you have an edge and great money management, what's wrong about leverage?
 
Dackster

I agree with your first point.
Yes I only have a half baked idea of a strategy and I am sure a lot of us don't have a full developed and robust strategy at the moment. I am aware of that fact, and personally I will improve going along this thread.

How do you define a severely underfunded account?
Isn't it all about how devisible your account is?
 
Willleung

Thank you for your openness explaining your recent HKD experience. Your system is obiously based on an different rule set compared to the Kelly formula system.

I will take the extrem volatile property of the Kelly system and focus solely
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on research for an edge
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and apply everything necessary to max the geometric growth. This includes the a perception of higher edge leads to higher bet sizes.

Please look at the logic:

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
No Edge (50% for success, 50% fail) results in 0% invest.
60% Edge results in 20% of the account been risked in a trade.
70% Edge results in 40% of the account been risked in a trede.
...
100% Edge results in 100% of the account been risked.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

The formular for the optimal bet size is:

BidSize% = 2*Edge - 1

PS: I am not scared about loosing, since I decided at the time I have been funding my account to be willing to loose ALL the money or to get rich!
So FEER is not the main emotion here.

It's GREED, IMPATIENCE and EGO. I need to work on all of that on becoming a succesful trader.
I am also working on PERSISTANCE (That's one of the reasons why I am posting).
 
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