van tharp's marble game

Originally posted by nylord1
So here is my question: Should I reduce my share size to 500 shares per trade and doubling up to 1000 shares per trade only when the conditions are right? I am not comfortable just yet to take on 2000 shares and keeping my default 1000. Am I correct in this line of thinking? Any help would be appreciated.
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why do you only want to deal with blocks of 500? when i determine how many shares i can buy/short, i will use whatever the calculated number is....431 shares, 683 shares...whatever. as my account size increases :) or decreases :(, my trade sizes will also adjust accordingly.
 
Originally posted by daniel_m
The idea of optimal f assumes - I'd say misguidedly - that we all want to maximize our upside. Anyone who trades for a living will tell you that's BS, you first need to take care of the downside.

Vince says that regardless of whether we like it or not, the maximum potential of our trading system/style lies somewhere within the "f" landscape, and that there is an optimal number for this "f" which will yield the maximum results. Again, I say, it's misguided.
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I want to maximize my upside, consistent with my risk parameters. anything short of that is a waste of time.
 
Originally posted by Gordon Gekko


why do you only want to deal with blocks of 500? when i determine how many shares i can buy/short, i will use whatever the calculated number is....431 shares, 683 shares...whatever. as my account size increases :) or decreases :(, my trade sizes will also adjust accordingly.
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again, 99% of the time I am unaware of how much $value of the amount of stock I have bought or sold because I am a prop trader which allows me leverage so I never have to worry about having enough in my account to buy/short.

Thanks
 
Originally posted by chasinfla


I want to maximize my upside, consistent with my risk parameters. anything short of that is a waste of time.
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That doesn't make sense. Your upside potential is defined by your risk parameters. The more you wanna make on a given trade the more you need to risk.

If you want to trade at the optimal, profit maximizing level, for your particular style, "optimal f" will have you routinely have you risking 15-25% per trade. Expect BIG drawdowns, and, depending on how good your style is, a near certain blowout. Then again, Niederhoffer is your hero isn't he?
 
Originally posted by daniel_m


That doesn't make sense. Your upside potential is defined by your risk parameters. The more you wanna make on a given trade the more you need to risk.
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That is freaky. I was about to post the exact same thing in very similar words, but instead I went looking up "optimal f" on the web a bit more. When I came back I thought I accidentally posted until I looked at the name.
 
Trading too big is bad not just because of the rare position that blows up, but also because of the freak losing streaks that come along every once in a while.

Let's say that you win 60% of the time on average. You are trading fairly decent size, and you making decent money consistently. You figure hey, my size is good, the money's coming in, no sweat.

But then for some reason the markets hit a series of unfortunate twists and turns and you have an extraordinary number of losing trades. You basically hit the skids for two weeks straight. What would your size do to you then?

I had to learn this the hard way. Every once in a while you walk through a patch of desert, and if you get too far behind when that happens it crushes your confidence. And if you try to leap back rather than creep back- presto, busted trader.

I think share size should simply represent a fraction of the total account size. If you always risk 1% of account per trade, your size will go up as account goes up, and shrink when account is going down.

As far as having some where you trade smaller and others where you trade bigger: I assume the trades where you put on more shares are higher quality in your estimation. Why not stick to those altogether and forget the others. If you trade half as often but eliminate half your losers and half your commish thats more dollars in your wallet.
 
Before entering a trade, I always determine at what price level in the stock will I say I am wrong and get out. I also have to keep in mind the nature of the stock and how large my slippage is likely to be. The next thing I decide is how much I am willing to lose, in a dollar amount. Then I know how many shares to play with. As my account grows, and I get better, more consistent results, I'll increase the amount I risk and will automatically start trading more size.

I think that starting with your full share size to begin with is better for daytrading. As I get more confident with my trading, I'm trying to do this more often. I tend to scale in to positions too much, giving me a poor average price. And the market seems to reverse course so often that when I stop out on a winning trade, I've only broken even.
 
To me, the incredible thing about that experiment , was that knowing ahead of time that they had a huge 3/2 edge, only two people made money. This is a license to steal. It's no wonder most people lose.
 
trading is not "stealing." trading is not "easy."

I am skeptical of anyone who promotes those ideas. Maybe stealing from Joe Blow was easy, but he's gone now. Try stealing from a battle hardened veteran. Is it any wonder traders are dropping like flies in these markets?

It reminds me of the general public who look at wealthy businessmen and think they are just making million dollar deals over cuban cigars and martini lunches, instead of always thinking and hustling, working their fingers to the bone, trying and failing left and right, busting their hump to get ahead. Or the way they look at big corporations and say "Oh, those guys just have a license to print money. They are a cash machine, they have it made." This is a myth. The public sees the fruits but not the labor behind it. Trust fund babies aside, the average wealthy person works their butt off- or they worked smarter rather than harder, and capitalized on an idea that the crowd missed or hadn't gotten to yet.

Even after you have made it to profitability as a trader, the coasting times are canceled out by the grueling times. The tour de france might be "easy" for Lance Armstrong, but only because he killed himself for years in dedicated training and preparation. Before you can relax in the lounge chair, you have to pay your dues in blood.

Truly successful trading- the kind that pays the bills- is hard work. Always was, always will be.
 
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