My apologies - when I see expressions like "coin flip" or "50/50", I automatically think zero-expectancy. What you are referring to is a 50% chance of making £2X, and a 50% chance of losing £X, per trade. Now that's some coin flip
risk management for day trading
- Thread starter Gladiator4444
- Start date
without money management there are no profits. ever. period. apart from a host of other reasons, you cannot trade a system without defining how to size positions, and if you cannot size a position, you cannot take a position.
there is no such thing as a tradable system without money management and every position taken/closed is an expression of the money management technique. the only choice is whether to do it unconsciously like most on ET, or to actually plan out something rational.
everybody on ET thinks they have a technical edge. very few understand money management. most lose money.
there is no such thing as a tradable system without money management and every position taken/closed is an expression of the money management technique. the only choice is whether to do it unconsciously like most on ET, or to actually plan out something rational.
everybody on ET thinks they have a technical edge. very few understand money management. most lose money.
I can see you've never created a system that works in the long run, at least for me, 10 years of intraday data in ES. Do all your signals have a Sharpe of over 1.5 consistantly at any given time within your testing period?
Money Management is given weight when you have a system with a volatile cyclical equity curve. It cuts the downward move and extends the ups. I wouldn't consider a cyclical equity curved system as "having an edge". You're just playing with market cycles and swinging it around.
It's truly a balance of Edge and Risk Management that makes a great system.
damir/db,
Need to define what each means by the term money management.
I think that most think mm is just the technique/method/science of growing/cutting back the number of contracts or number of shares for the next trade, given what happened before.
Some would add parts of risk management, mainly what % of your equity to risk per trade, again looking primarily at number of contracts or shares played.
Even others include the whole area of risk management, mainly profit target and stoploss placement and dynamic exit management. That's where I am when I say mm.
Some time ago, one of my teachers demonstrated to me that if you just have random entries (e.g., regular coin flip) you can still be profitable if you define the exit strategy and implementation well. And if you do that very well, you can be very profitable. Profit is made upon exit, not entry. Couple that with a decent way to manage the amount risked and the profit targeted per trade, and you have a solid system. That's not what I do - entries for me are very important (if nothing else, for psychological reasons) but I do know that his math is correct. In other words, he showed me that mm can be a sufficient edge on its own.
So, clarify what each means by mm and you'll probably see that you agree more than you think.
Need to define what each means by the term money management.
I think that most think mm is just the technique/method/science of growing/cutting back the number of contracts or number of shares for the next trade, given what happened before.
Some would add parts of risk management, mainly what % of your equity to risk per trade, again looking primarily at number of contracts or shares played.
Even others include the whole area of risk management, mainly profit target and stoploss placement and dynamic exit management. That's where I am when I say mm.
Some time ago, one of my teachers demonstrated to me that if you just have random entries (e.g., regular coin flip) you can still be profitable if you define the exit strategy and implementation well. And if you do that very well, you can be very profitable. Profit is made upon exit, not entry. Couple that with a decent way to manage the amount risked and the profit targeted per trade, and you have a solid system. That's not what I do - entries for me are very important (if nothing else, for psychological reasons) but I do know that his math is correct. In other words, he showed me that mm can be a sufficient edge on its own.
So, clarify what each means by mm and you'll probably see that you agree more than you think.
Quote from Yannis:
damir/db,
Need to define what each means by the term money management.
I think that most think mm is just the technique/method/science of growing/cutting back the number of contracts or number of shares for the next trade, given what happened before.
Some would add parts of risk management, mainly what % of your equity to risk per trade, again looking primarily at number of contracts or shares played.
Even others include the whole area of risk management, mainly stoploss placement and dynamic exit management. That's where I am when I say mm.
Some time ago, one of my teachers demonstrated to me that if you just have random entries (e.g., regular coin flip) you can still be profitable if you define the exit strategy and implementation well. And if you do that very well, you can be very profitable. Profit is made upon exit, not entry. Couple that with a decent way to manage the amount risked and the profit targeted per trade, and you have a solid system. That's not what I do - entries for me are very important (if nothing else, for psychological reasons) but I do know that his math is correct.
So, clarify what each means by mm and you'll probably see that you agree more than you think.
Money Management... Risk Management... Position Sizing...
It's all about "Risk" Management.
Edge not only means Entry but as a pair of Entry/Exit. They all intertwine but having a negative expectancy signals(again, pair) will eventually kill the "Risk" Management.