What do you think of this account management system?

[Kovacs]

At the prop firm in which I trade, we have a daily maximum allowable loss that changes depending on your performance. For me, that's -$450 right now. You're allowed to go 1.5x your shutdown limit. I trade the ES (2 contracts at a time, sometimes 4). The first major milestone I have is a $10,000 month.

At this point, I stop when I reach a daily goal of $500. This makes no sense as this means I need a perfect month just to reach the goal. So I'm thinking of doing the following:

- Daily goal: 2x shutdown limit
- Strictly obey the maximum allowable loss. If it's -$450, then I don't go past -$500.
- When I reach 1x shutdown limit, I use a trailing stop loss of 0.5x shutdown limit.
- Limit myself to 2 contracts for now, and only double up to 4 once my shutdown limit also doubles.

So if my shutdown is set at -$450, I'll try to reach $900. If I get above $450, continue trading until I either reach 900 or have a loss of $225 from the top.

This way, if a third of my days are shutdowns, then I stand to have a much better chance of reaching my milestone.

What do you think?

 

[austinp]

Let's approach this equation from another angle.

Forget about what your max-loss limits are. Assume you will rarely hit those, and focus on being profitable instead. Do not base your success on what failures will permit. Base your success on two factors:

#1: What the market offers per your approach

#2: Your skill level of managing your approach

*

Asking to average +9pts ES daily (two contracts X $50 = $900) is absolutely not going to happen. But, trading two contracts can easily hit -$450 loss.

Too much leverage on not enough risk-loss limit to ever reach your goal. Reset the objective like this:

One ES contract turned. Seek to average +2pts per day / +10pts per week. Once your account balance builds enough to raise risk-loss limit, raise corresponding number of contracts.

Scale into two-lot or four-lot positions as price action moves in favor... not averaging down = against. Once your account balance builds enough to raise risk-loss limit, raise corresponding number of contracts.

**

Your current ratio has way too high an expectancy for success with too little parameters for corresponding risk. It won't happen without you being extremely skilled and experienced already, in which case you'd probably be trading bigger & wider right now.

If you try to build the management backwards from what you'd like to earn, it must be reasonable for the account. Five contracts with a max-loss intraday of -$2,000 on a bad day is more in balance with seeking +$1,000 daily profit average spread over twenty days' cumulative result.

Gotta build to those levels before it can be expected to come.

 

[Kovacs]

Quote from austinp:

Let's approach this equation from another angle.

Forget about what your max-loss limits are. Assume you will rarely hit those, and focus on being profitable instead. Do not base your success on what failures will permit. Base your success on two factors:

#1: What the market offers per your approach

#2: Your skill level of managing your approach

*

Asking to average +9pts ES daily (two contracts X $50 = $900) is absolutely not going to happen. But, trading two contracts can easily hit -$450 loss.

Too much leverage on not enough risk-loss limit to ever reach your goal. Reset the objective like this:

One ES contract turned. Seek to average +2pts per day / +10pts per week. Once your account balance builds enough to raise risk-loss limit, raise corresponding number of contracts.

Scale into two-lot or four-lot positions as price action moves in favor... not averaging down = against. Once your account balance builds enough to raise risk-loss limit, raise corresponding number of contracts.

**

Your current ratio has way too high an expectancy for success with too little parameters for corresponding risk. It won't happen without you being extremely skilled and experienced already, in which case you'd probably be trading bigger & wider right now.

If you try to build the management backwards from what you'd like to earn, it must be reasonable for the account. Five contracts with a max-loss intraday of -$2,000 on a bad day is more in balance with seeking +$1,000 daily profit average spread over twenty days' cumulative result.

Gotta build to those levels before it can be expected to come.

Thank you for the feedback, austinp.

I've modified the scheme accordingly. Seek to make 2+ points on average with enough consistency to ramp up contract size as risk limits allow. Focus on staying positive.

This definitely seems like the smarter way to go.