If hypothetically a trader " feels " as if they have found a system / method that is profitable ( even though they have never backtested it, Monte Carlo, Walkforward, etc.... ), they just feel as if they have a profitable and robust strategy Assuming this, what would you recommend as far as Money Management and how to trade...... would it be smarter to employ a Fixed Fractional ( Risking 2% on each and every trade, regardless if you're up +$1,000 in your account OR if your down -$1,000 in your accoung, you will still risk 2% on every trade OR would using the Ratio method work better in this example ( where we use a Delta of say $500 , so using a starting Bankroll of $1,000 , trading just 1 standard lot and a delta of $500 , the sequence would be ...... $1,000 + 1 ( lot ) x $500 = $1,500 ( so once are account is up to $1,500 we would then add another Lot and start trading 2 Lots, and would NOT move up to trading 3 Lots Until...... $1,500 + 2 x $500 - $2,500 So on and so forth ) You really seem to have a grasp on Money Management and Fixed vs Ratio, expectancy, etc.. So I wanted to please run my question(s) by you and get you advice and recommendation Thanks so much for your time and help, Really appreciate it - Michael
Why don't you just use 2% of equity? It is still fixed fractional but based on equity not on initial bankroll. "as the account equity M increases due to accumulated trading profits, the position size N also increases proportionally. The reverse happens when the account equity decreases. Thus, this method, even though it is fundamentally simple, is nevertheless dynamic in nature. It is also classified as an anti-Martingale betting strategy, as opposed to a Martingale one. Martingale betting strategies increase the bet size if the account equity drops, in an attempt to recover losses and even make a profit, provided of course there is a strategy with a winning bias. Similarly, the bet size is decreased when the equity increases, for the purpose of limiting risk exposure and securing realized profits. This type of betting strategy can be used for position sizing but many experienced traders do not recommend it. The reason that Martingale betting systems can fail and lead to disaster is that in the presence of a very long streak of losers, such methods guarantee in theory an eventual win if, and only if, the available equity is infinite. In reality, however, accounts have a finite size, and there are always a number of consecutive losers that, when combined with a Martingale betting method, can result in total ruin."
starting roll of 1k and taking a $500 hit on ONE trade? some commodity funds agree before hand to shut down and send the money home if they ever have a 50% drawdown. And you would do that on just one trade? Man, must be some good system.