Position sizing

[sosa1974]

Quote from mschey:

I hate losing....always have. In the past, I was happiest when I was green, when I was red, I felt like they got the best of me. I have always thought that there is no reason to be red on ANY day, and that really helped me take my trading to the next level. Afterall, my smaller size makes me more like a guerillia action force. Get in, strike hard, get out....move on. That served me well. Especially in the high VOL markets of 5 years ago. Low vol markets require a little different strategy.

Getting a little older now, and there is a limit to the number of trades I can do on any given day, 3 years ago I began the transformation process and have since recreated myself as a highly automated trader, BP is a big edge, so is getting off lots of trades which reduces my risk and increases my returns. Have you ever noticed that the best trades in all markets tend to cluster? That's when professional traders have the biggest edge. Today, I have systems that trade equities, and a few systems/strategies for futures. I am really stretching the realm of possiblity when it comes to my trading, and I can see trading as many systems as I can create, across a broad spectrum of markets. (The technology back bone is there, now it's just a matter of implementation) This wouldn't be possible without a few good fiends, some of which I have met here on ET. For their help and friendship, I am really grateful.

Multiple systems represent a challenge in risk management. The challenge, is that when things go to hell, all correlations go to 1. To meet the challenges of this percieved risk, I am looking to match up systems, so that each reversion type strategy has it's counterpart in a momentum based strategy with correlations that are near zero, and if i'm really lucky, negative. The former has been achieved, the later is still a dream.

The money managment strategy I use is a combination between the fixed ratio approach and the williams formula. I Risk a % of the account on every trade, but I set equity targets for raising size. I trade the same size until I make x dollars of profits, then I increase the size and stick at that level until I make X dollars again.

If you ever spend time studying systems on a trade by trade basis, you'll likely see that your worst trade is yet to come. So I put in a hard stop on all positions, an uncle point that I bail if all goes wrong. If I know I made a mistake, system error, bad data, etc. Exiting the positions immediately is my strategy there.

Here is another key point, I am watching and monitoring trades through out the day. If news breaks on a stock, I immediately abandon the strategy and start trading the stock in line with the newly released news. I have plans in place to deal with both of the worse case scenarios as I see them today, and update my strategy if I come up with other possibilities. UBL capture or death, short stocks and long oil will be very painful. A major terrorist attack on a US city, a nuclear detonation, or chemical attack are other threats and I need to anticipate and have a plan for managing if it happens.

A lengthy post, but there you have my history as a trader, how I developed my trading philosphy, my trading plan, my risk managment plan, and my money management plan.

Good luck and good trading!

Well I postion trade a lot more so I get marked to market red a lot . Intraday trading is for offsetting a postional that I may have gotten into too early. Basically when the position breaks my way I am now able to ride it a lot longer. Anyway Good luck to all, its a rough ride. MS, I agree with some of your concepts very proactive approach leaving nothing to error.

 

[alpha_monkey]

regarding, "most successful traders are difficult people."

Quote from Bitstream:

false my arse, i know a bunch of 'em and they are all very very difficult people but if u get to know 'em they are not bad guys at all infact very trustworthy..of course i said most not all.

the *best* traders i've met have been an intriguing mixture of relaxed, competitive and completely focused on whatever they're doing.

i've met numerous average traders who like to pretend/live the bigshot trader lifestyle. obviously, i've met a few ass*holes along the way as well. the only thing i can say about the ass*holes is that none of them were popular or made the top grade financially/careerwise.

related to this topic, someone on ET gave an IB newbie some advice - don't be cocky, be a decent guy. that is good advice for the real world, which bizarrely perhaps, includes ET.

AM

 

[HolyGrail]

Well the only reason I ever entered the latter part of this thread was due to the advice given to LondonUsTrader by Mschey and I quote.

With all due respect, and this may sound a bit harsh, but you have a losers mentality. The first paragraph, you say that trading is a net losers game. Then you speak of money management as a way to keep you alive as long as possible. In both cases, the presupposition is that you will eventually lose, and die. If that's what you believe about the markets, you will never be successful. I suggest you get on Ebay and pick up a copy of "Get the Edge" by Tony Robbins. It will help you address your issues about the market.

I personally felt that was so presumptious on his part to chastise someone for staying within their own risk tolerance. There are many ways to make money in this market but the key to good mental health is to stay within your risk tolerance. You cannot look at opportunity cost if you don't have the risk tolerance for certain strategies.

One thing no one noticed or at least didn't comment on was this statement by Mschey.

Each set up is a system in itself, if you treat it as such, you can determine the optimal amount to bet based upon that set up.

Please look at the above statement. Does anyone notice the word bet?

Now would it be presumptious of me to assume Mschey's money management system is based on a gamblers betting system? Is it because he actually thinks certain trades are more likely to succeed than others? Well if that is the case why not just trade the optimal trades? Personally I don't really care, but I do want to see people trade within their risk tolerance, and not be chastised for it.

 

[mschey]

Quote from HolyGrail:

Well the only reason I ever entered the latter part of this thread was due to the advice given to LondonUsTrader by Mschey and I quote.



I personally felt that was so presumptious on his part to chastise someone for staying within their own risk tolerance. There are many ways to make money in this market but the key to good mental health is to stay within your risk tolerance. You cannot look at opportunity cost if you don't have the risk tolerance for certain strategies.

One thing no one noticed or at least didn't comment on was this statement by Mschey.



Please look at the above statement. Does anyone notice the word bet?

Now would it be presumptious of me to assume Mschey's money management system is based on a gamblers betting system? Is it because he actually thinks certain trades are more likely to succeed than others? Well if that is the case why not just trade the optimal trades? Personally I don't really care, but I do want to see people trade within their risk tolerance, and not be chastised for it.

Personally, I don't care how you feel! I'm not here to make you or anyone else feel good. I'm here to put out some quality information on money managment, position sizing, and risk management.

Second, I wasn't chastizing him for staying within his risk level....go back and read the post you moreon. I said he had some conflicting beliefs about trading and money management. If you believe you are playing a "net losers" game, there is very little chance that you are going to be successful. Second, if you believe that money management is to "keep you alive" as long as possible, the presupposition is that you are eventually going to die. Not a healthy mindset, especially if you want to become a successful trader. TRUTH HURTS.....BUT IN THE END....IF HE REVISITS HIS BELEIFS, HE WILL BE BETTER OFF.

The pioneers of modern money management were not wall street traders, they were card counters. They figured out that money management would help them to maximize the growth in their account, given their edge over the casino. This is the origin of the word BET as it applies to money management. Due some homework before you embarass yourself again.

 

[HolyGrail]

Quote from mschey:

Personally, I don't care how you feel! I'm not here to make you or anyone else feel good. I'm here to put out some quality information on money managment, position sizing, and risk management.

Second, I wasn't chastizing him for staying within his risk level....go back and read the post you moreon. I said he had some conflicting beliefs about trading and money management. If you believe you are playing a "net losers" game, there is very little chance that you are going to be successful. Second, if you believe that money management is to "keep you alive" as long as possible, the presupposition is that you are eventually going to die. Not a healthy mindset, especially if you want to become a successful trader. TRUTH HURTS.....BUT IN THE END....IF HE REVISITS HIS BELEIFS, HE WILL BE BETTER OFF.

The pioneers of modern money management were not wall street traders, they were card counters. They figured out that money management would help them to maximize the growth in their account, given their edge over the casino. This is the origin of the word BET as it applies to money management. Due some homework before you embarass yourself again.

LMAO. Yes you tell him what is best for him. Let him know what a loser he is for being conservative in his money management. If you are going to call someone a moron at least know how to spell it otherwise who do you think looks like THE moron?

I didn't come to the thread for any other reason than your arrogance that your way to trade is the BEST and ONLY way to trade. You truly are totally full of yourself. You told a person you don't know that they have loser issues. Where did you get your psychology degree? How long have your practiced psychology? How many sessions did you have with LondonUStrader before you so kindly analyzed him?


The person who started this thread was trying to find a basic money management strategy to begin her trading. You came into the thread to show-off your five year system. Well I hope one day others will be impressed as much of you as you are impressed with yourself.

Now Piss off.

 

[mschey]

Quote from HolyGrail:

LMAO. Yes you tell him what is best for him. Let him know what a loser he is for being conservative in his money management. If you are going to call someone a moron at least know how to spell it otherwise who do you think looks like THE moron?

I didn't come to the thread for any other reason than your arrogance that your way to trade is the BEST and ONLY way to trade. You truly are totally full of yourself. You told a person you don't know that they have loser issues. Where did you get your psychology degree? How long have your practiced psychology? How many sessions did you have with LondonUStrader before you so kindly analyzed him?


The person who started this thread was trying to find a basic money management strategy to begin her trading. You came into the thread to show-off your five year system. Well I hope one day others will be impressed as much of you as you are impressed with yourself.

Now Piss off.

So now you're down to correcting my spelling errors.. you are pathetic. Seriously, Can you read.....damn you might be the dumbest sob on here. Hi-lite where I stated that my way to trade is the best and only way to trade, can you do that?

Read the thread from start to end...I know that's alot of reading for you, maybe you can get it done by tomorrow? Then show me where I called him a loser...I said he had a loser's mentality. I think...when it comes to trading...I know something about the psychology of winning.

I highlighted all of the relevent information out there regarding position sizing, I even went as far to include how I size my positions.

As always, if you don't like what I have to say, you are free to put me on ignore.

 

[HolyGrail]

Well let's see the arrogance.

You pay a heavy price for being too conservative.

Sorry, but I didn't know this was a race to see who could make the most money the quickest. If you make it quick you can lose it just as quick regardless of what you seem to have convinced yourself.

and here's one

All do respect, you don't know what you're talking about! As I've said, the leverage issue is not a problem when you know the dynamics of your system strategy.

Leverage is leverage, PERIOD. If you trade with leverage consistently you are taking on more risk PERIOD. Not everyone wants to increase their risk. They are not stupid. They are trading within their comfort level. If you are comfortable with more risk that is great, but to say they are paying a heavy price is YOUR OPINION, NOT A FACT.

let's see some more arrogance.

What I find that's silly, is that you can't figure out the cost of being too conservative, you had better spend some more time studying money management and geometric growth functions.

Just call the guy dumb because he doesn't see what you think you see.

The purpose of money management is not to keep you alive, it's to make you money. To maximize your growth in the account given the levels of risk you can tolerate.

Sorry but it is important to stay in the game. You may think you have an edge, but it is not a guaranteed edge. You may think you have all of your losses limited to 10% but there are no guarantees. Nothing lasts forever. Staying in the game is not a losers mentallity. It is an intelligent concept because every trade is not guaranteed.


and then we have this

Just quoted your own words...take it FWIW. You are operating under some false assumptions, and they will not serve you well in becoming an Elite trader. (ok...that was a little condescending, but my experience with most on ET, is that most are hacks and wanna be's, so I operate from the presupposition)

That's a great presupposition. Again more arrogance.

and then we have this

If you can't take a little constructive criticism then don't open the door and refer to someone else's post as "silly!" I do, what others dream about, and that's trade for a living. I trade both discretionary and mechanical systems. I currently trade 5 different systems, so when it comes to trading, systems and money management, I am one of the few who do(and consider myself an expert), versus the many who dream.

I'm glad you consider yourself an expert but guess what? That doesn't make you an expert. When the investing community considers you an expert you can make that claim. Otherwise your just another guy trying to make a living at trading.

boy this arrogance is getting longer and longer

One common misconception, is that you never add to a loser. This is a fallacy. Adding to a loser and trading out, can and does work very well. A good general rule of thumb is that when you can't take the pain, and you have finally reached your puking point on a trade, double your position and PLACE A STOP ON THE ENTIRE POSITION TO PROTECT YOURSELF.

Good traders to this all the time. Not recommended for those with a weak constitution, fragile health, weak heart, or small trading account.

Translation. I have big balls. I can average down losers and good traders do too. PURE SELF INDULGENCE. Do you have any statistics on that?


Whoda thunk it. I found some more arrogance.

Successful traders don't believe that trading is a net losers game...that's for college professors and efficient market theorists. My finance professors argued with me for many hours that I couldn't make a living trading the markets. Well...I have been doing it for five years, make a hell of alot of money doing it, and continue to improve and get better. You know what they say...those who can do...those who can't teach...and those who can't teach....teach gym.

Let me know where you stand in twenty years. 5 years means absolutely NOTHING!!! I wouldn't let any five year "professional", and I am using that word very loosely here, control anything that was important in my life.

and another

he problem with a forum where people post under aliases...is that you get alot of characters that make up stories. You get alot of characters that make exaggerated claims, and you get alot of guys that have read a few books that try to pass them off as experts

Gee you are a self-proclaimed expert why can't anyone else be one. Are you worried about your "elite" status being undermined.


I could go on and on and on.

Now I am done. Good luck.

 

[ElectricSavant]

HolyGrail you are just wrong here.

Try to open your mind and imagine how....


Leverage is leverage, PERIOD. If you trade with leverage consistently you are taking on more risk PERIOD.

 

[ElectricSavant]

HolyGrail,

Here is another misnomer...

To get better at your Job, you should seek efficiency. The market has no idea what your comfort level is.


They are trading within their comfort level.

 

[ElectricSavant]

I have no comment. But what is the point? Efficiency is the cause of this?


Sorry, but I didn't know this was a race to see who could make the most money the quickest.