The best money management methods ...

[K-Pia]

maybe we have the same concept and same idea but with different words about Taleb fragility idea. Taleb says put 95 % of your equity on zero risk investment like governmental notes and put the rest 5% on very high risk trades .so this idea is about payoff AND distribution IMO

Yes. That's the barbell strategy.
It's about profiting from the tail of it's portfolio.
He doesn't think Gains come from the bulk but from the tails.
True there is a notion of Probability here. That's the pareto distribution.
I just want to add that he won't risk those 5% selling puts =D
That's where come the key words (Long OTM options).
-> Optionality (Flexibility), Asymmetry & Convexity.

 

[lawrence-lugar]

it seems we all have our entry rules,
but what really matters is how to deal with a trade "after" entry .
what are the best money management /risk management methods in our opinion ?

...try to see the Greater picture of things -- in calmness, and clarity.

i know it may seem like philosophical mumbo jumbo -- but it's only you...Who can See the Light.

 

[doggyfx]

As I trade on impulse I close my trades even if I hover in small loss after 3-4 minutes as impulse wears off and again... UNCERTAINTY.
Foreign exchange is very uncertain by its nature so if you failed to catch to moment. Better to retire.

 

[K-Pia]

As I trade on impulse I close my trades even if I hover in small loss after 3-4 minutes as impulse wears off and again... UNCERTAINTY.
Foreign exchange is very uncertain by its nature so if you failed to catch to moment. Better to retire.

Not only FX is uncertain.
Knows the nature of the uncertainty.
And what can shape its "behavior", distribution.
Don't trade on impulse, but because Risk < Reward.
Or at best because E(Risk) < E(Reward) ...
Not every uncertainty is alike.
Clock < Coin < Dice < Cloud.

 

[Handle123]

I don't trade on impulse but risk is always greater than my possible reward in day trading. I look at risk as more of a hedge on my account. I seldom expect to have to take full loss but more of partials cause either time expired/price didn't drop against position to add on more which brings ave price down or time to reverse which causes the loss. There is chop where we buy low and reverse to sell highs, but if buy low and sits there, time expiration forces me to exit and sometime where I got in which makes it a losing trade, loss of fees and my time.

How come those who get out all the time at breakeven are happy with that? Does no one factor in their time? If you have to work for someone and they said they broke even on selling some product and told you that you not getting paid cause it was breakeven, you have a fit. But when trading you not shooting for one tick on breakeven trades makes no sense to me.

 

[K-Pia]

I look at risk as more of a hedge on my account.

What do you mean ?
How is risk be an hedge ?
Add local risk to decrease global risk ?

How come those who get out all the time at breakeven are happy with that?

I agree. BE is a loss in itself.
But BE is better than Max Loss.
So I am happy if I can settle at BE.
Those unhappy won't BE & Postpone,
Which could potentially bring bigger losses.
However I'll try to avoid BE as I'd avoid Max losse.

 

[Handle123]

If one uses Protective stops, are they not hedging you won't lose entire account?
You do enough back testing, you would not believe how much people lose by not including time spent just on trading hours alone which I must add are very small percentage to overall commitment of creating trading plan. There is no end to making some value to be breakeven which has same probability of coming back to lock in one tick or two ticks or minus one, so might as well as go for plus one tick to cover fees and one's time.

 

[CME_Trader]

what other money management concepts are present there ?

 

[Handle123]

Having right trend indicator or having two trend indicators, know it sounds confusing. Say you have one for your main definition for trend and you have different one when there is no slope, I use John Hill's "thrust" bar, in my case I use a bar in which entire range is above 18sma and now trend is up. Having a better defined trend during transition can save me from taking one trend trade going the opposite direction and this thrust bar looks like a retracement to sell, but it is really telling me price breaking out for New Trend. Thus, in different way of risk management, this one missed loss for me is saving me 3.00 points.

 

[CME_Trader]

Having right trend indicator or having two trend indicators, know it sounds confusing. Say you have one for your main definition for trend and you have different one when there is no slope, I use John Hill's "thrust" bar, in my case I use a bar in which entire range is above 18sma and now trend is up. Having a better defined trend during transition can save me from taking one trend trade going the opposite direction and this thrust bar looks like a retracement to sell, but it is really telling me price breaking out for New Trend. Thus, in different way of risk management, this one missed loss for me is saving me 3.00 points.

Handle123,using "thrust bar" is more related to criteria to entry point . you always said you have 2 rules for entry and 10 rules for money management (which i think means after entry) .finding enough backtesting (a few thousands samples) can show us "optimum" entry points as well as "optimum" break even and exit points. if someone want to apply "money management" rules to his/her system ,in general what should he do ? should he look at backtesting for specific patterns like monophone days and avoid them (for trend traders) or what ?
you always said 95% of success in trading comes from money management and only 5% is from entry point. the monophone days and 18sma deals with entry points IMO & not with money management.suppose someone has a trading system with enough backtesting .how can he improve his system by applying money management rules? i think looking for optimum exit points or time stop loss or break even point is a example of money management. what other topics do you add to this list ?