Use market to place stop, Kelly to size. Fine. No argument. Can't randomly use Kelly though.
Money Management Rules Day Trading
- Thread starter Howard
- Start date
Use market to place stop, Kelly to size. Fine. No argument. Can't randomly use Kelly though.
Missed this earlier nice page
I think answers are within extensive back testing. I am a better scalper than day trader which runners for me is luck that is created by having well back tested systems. Systems average down on all trades. One system quits at end of one loss, another will not take actual trade until sim lose occurs, some increase size when loss occurs. As far as how much to risk comes down to MAE, MFE and price action. If one does not like results, either more rules to take away losing trades or reduction of rules. Breakeven is plus one tick for all systems, though if volume on the dome says unlikely, automation identifies and exit at original entry price. One method was made to take advantage of averaging down to get out at plus one tick on original trade. All systems use 40 point stop loss as catastrophic protective stops, when time expires or price action shows continuation of wrong direction- new target is plus one tick. As a scalper, unwise to use stops too close, price moves so fast at times, don't want to be in exit before entry, LOL.
As years pass and knowledge gained, you come up with many more questions to ask of systems like if chop day, running day, is ES behaving like NAQ or DOW or going opposite of T-Notes, are spreading better opportunity than outrights, size of bars too small or large, is volume too large or too small, times of the day, cycles of the moon, last 4 trading days of the month and first 2 trading days of new month, holidays/holiday weeks(my worst weeks are holiday weeks), is trading non day session better than during the day, is ES acting correctly as the Dax, is Bund acting same as T-Notes, extremes of night session-day session-weekly-monthly-yearly, elections, weather, full moons, major cluster fibs/Gann, inside bars/outside bars, and what is last book so many are reading-where do they get out of losing trades so I can get in, also go by magazine area and see if majority of business mags are very Bull or Bear. And of course a mountain of price action one discovers through the years.
Happy New Year All.
If you trade fractional Kelly, you trade options and your system has positive expectancy, your can actually set your stop at zero if you own options.
Hah that's what I do with options at zero. Nice.
I don't like replying to long-forgotten post, but I thought this one warrants a reply.
Whether it's REALIZED or UNREALIZED, you should always nip your loss at the bud before it goes out of control. It's a bad practice (or rather bad faith) to believe that unrealized loss is not really a loss. Sure, price could reverse and you could potentially get it all back. However, the fact that you rode through the loss indicates that you had no idea what you were doing. That loss could have turned into an avalanche and you would have had no other choice but to sell (aka margin call).
You're absolutely right, Handle123. Correct bet size is dependent on the metrics of your system.
Simply put: the better your expectancy, the more you can risk on each individual trade.
Well, IMO, if you trade with a hard stop (which you should, unless you have a very good reason such as size considerations to not place an actual stop in the market), there should not be a difference between a realized and an unrealized loss as you're effectively stopped out each time.
Good for you.
If you’re gonna day trade (a bad idea for most mere mortals) you’d better automate your trading system - including position risk management.
And since you’re racing highly capitalized private firms with ungodly ECN’s - you will be getting picked off or hung on orders whether you’re using a mouse or an automated strategy.
And since you’re racing highly capitalized private firms with ungodly ECN’s - you will be getting picked off or hung on orders whether you’re using a mouse or an automated strategy.