Quote from andrasnm:
what is so special about his money management algorithm? Everyone should use a unit concept in buying and selling. Period. Use the ATR and calculate the unit for stocks and especially futures. This is no brain surgery.
andrasnm,
To answer the question in the first part of your statement (assuming that you are really looking for an answer
) if I remember it right, all FR adds over and above what FF teaches is that, if, for example, your account has $15,000 and you are trading, say, 3 contracts, then before you add a fourth contract you have to wait until you make your pre-selected profit amount, say $3,000 profit PER CONTRACT (total $9,000 profit, account level=$24,000) instead of taking that step after you just make $3,000 profit total (at which point, your account would be at $18,000). Takes you up the ladder more cautiously. Coming down, you also preselect an amount of profit per contract to maintain, say $2,500, and, so, if your account peaks (between trades) at $26,000, when you cross the $22,500 level, you drop back down to 3 contracts at the next trade. Which has the effect of lowering your exposure to loss fast or slow, the way you think it's best. Your ability to match the right growth level (in this example, $3,000) and the correct INDEPENDENT drop level (in this example, $2,500) TO THE MARKET AND THE PREVAILING CONDITIONS, can help you win or lose. Studying indicators such as ADX or D+/D- or ATR etc, especially as they change, can help some traders do that better. Ryan's software mm tool, which I bought but never used (yes, I know...), helps you select optimum variables, or, at least, promises to do that for you.
Ryan's math in his book shows that his method is a safer and more effective way of managing your money as you trade, especially in the beginning. Other traders/authors agree, but, sometimes, the various arguments on risk/reward variables become a bit too religious for my taste real quick and I drop off. Intuitively, for the way I think, FR is better than FF, especially as it forces the trader to be thinking PER CONTRACT and also as it keeps those two key variables independent. Even Larry Williams agrees with Ryan on that main issue, although he disagrees on some other secondary (but still important) stuff written in Ryan's book.
Maybe I've missed a significant detail here, or, maybe I've changed something from what I read in Ryan's book years ago, but this is how I understand and practice mm/FR. I think it's pretty close. Now, have you heard of Tim Cho, the founder of the TCI trading school and methods/tools? His mm guidelines, authored before Ryan's book, present the same philosophy. Go figure... at any rate, I like, and have benefited from, them both
