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	Forums ›› Trading for a Living ›› Trade Management ›› Do you consider money management an edge?

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LeeD

Registered: Feb 2008
Posts: 1765

09-28-10 02:35 PM

Hi NoDoji, thanks for the swift reply at the start of the thread.

Quote from NoDoji:

If you have a 50% win rate (no edge), but target twice the profit of your stop loss on each trade, how is that not a money management edge?

I think there is no argument that being able to set a target twice the size of the stop-loss and still have 50% win rate is an edge. The argument is whether this is money management as opposed to setup (I trade only when I can set the target twice the stop-loss) or possibly trade management (I patiently wait till the gain on a trade reaches double the stop-loss.)

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LEAPup

Registered: Aug 2008
Posts: 4105

09-28-10 02:52 PM

Quote from NoDoji:

If you have a 50% win rate (no edge), but target twice the profit of your stop loss on each trade, how is that not a money management edge?

Geez proved this in his thread here in 2009 and I followed his live calls with entries, stops and targets for over a year.

Now ET Mom, that actually IS an edge.

We still love you though!

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LEAPup

Registered: Aug 2008
Posts: 4105

09-28-10 02:54 PM

Quote from ivanbaj:

Being able to hit 2:1 with 50% accuracy is an edge.

50% with 1:1 is a wash.

P.S. I guess the expectancy is important not the 50% of success.

I think 50% with 2:1 is = to 75% for 1:1. If you can hit 2:1 with 50% then it means that 75% of the trades you can guess in what direction the price will move from the current price to -10 or + 10 ticks or what ever your 1 is.

You see 50% looks easy and 75% looks tough but they are the same in your case.

Unless there is a good reason that guessing that the price will move to +20 before it goes to -10 with 50% accuracy is easer than guessing that the price will go to +10 before it goes to -10 with 75% accuracy.

Agreed. Good post!

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LEAPup

Registered: Aug 2008
Posts: 4105

09-28-10 03:05 PM

Quote from Random.Capital:

The only "edges" in Vegas come from breaking the law. The "best money management system" for Vegas is to not go, period.

Either that's a terrible analogy, or he's making a deeper comment than some might think.

There are guys who can walk into vegas with an edge. Once it's figured out that they have an edge (yes that means they are winning more than the house wishes to pay out), the casino will kindly escort you out. They have the FULL right to refuse services to anyone for ANY reason, and sadly, that means if you win too much=goodbye as they know you have an edge.

Check out the History Channels "Do's and Don'ts in Las Vegas." Interesting show.

Again, go into any Vegas Casino with THE best money management system ever devised, and no edge, see what you come out with...

Jack Schwagger was giving a very deep thought analogy. Once a person realizes that the markets are not random nor efficient, they will NEED TO HAVE AN EDGE as NO money management system will cut the mustard without an edge... Just a slower, more painful death.

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henry76

Registered: Feb 2007
Posts: 167

09-28-10 03:27 PM

I suspect 90% of traders believe they have an edge and that money management is key , I also suspect 90% of traders arn't profitable.

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intradaybill

Registered: Feb 2008
Posts: 2962

09-28-10 03:58 PM

Quote from LeeD:

The argument is whether this is money management as opposed to setup (I trade only when I can set the target twice the stop-loss) or possibly trade management (I patiently wait till the gain on a trade reaches double the stop-loss.)

You can try...lol... Make the wrong call and patiently wait for the market not to hit your stop but turn around and hit your target.

Gee guys... timing is everything in the markets. Timing requires an edge. Money management assures you will not get a margin call even if you have the right timing and that your winnings will grow better than linearly, if you have an edge.

Friendly advice to some of you, do not risk a penny in the markets, you will lose it...

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