Best Books on Money Management, Position Sizing etc

Discussion in 'Risk Management' started by 1flyfisher, Sep 22, 2007.

  1. I have scanned the prior threads on books here on this topic. I'd like to explore this again.

    I have read Van Tharp, Elder....a few others.

    What books have you found to be the best on this subject?

    I like to read and I'm looking for some new reading material and would like to spend some time on money management, position sizing, etc ideas for practical application for traders.
  2. I have to say I have NOT read this book myself, but I did have someone recommend it to me.

    Money Management by Ralph Vince

    If anyone here has read it, I would like to hear what you thought.
  3. ess1096


    The Way of The Turtle by Curtis Faith

    High Probability Trading by Marcel Link

    Both do a great job on this subject.
  4. This is one of the main lessons I aim to teach in my book. As you'll discover, throughout my career, I've experimented with many different position sizes, which has been both the gift and the curse for me.
  5. I have High Probability Trading by Link on hold from my local library. I'll give it a try.
  6. Ezzy


    Ryan Jones has a little different approach if you're looking for something new. Everyone has critics, even optimal F (Ralph Vince) can blow you up. Then there's Sweeney's Max Adverse Excursion.

    You can get the gist of most of these on the net. Risk of ruin aside, it really comes down to how much of a swing in your equity you can take. Williams used Kelly criteria in the World Cup, but that will blow you up real quick.

    Optimal F is a good starting point, then adjust for your stomach. Jones takes the approach starting out more aggressive and reducing as the account gets larger. Sweeney prepares for the largest draw down you haven't seen yet. I think the Tharp book pretty much covered these guys.
  7. PowerST


    For the basics / introduction to the topic:

    Van K. Tharp, Trade Your Way to Financial Freedom, McGraw-Hill, 1999, ISBN 0-07-064762-3

    More advanced:

    Thomas Stridsman, Trading Systems That Work: Building and Evaluating Effective Trading Systems, ISBN-10: 007135980X, ISBN-13: 978-0071359801

    I have been reading this Stridsman book for the first time myself recently, and I think that anyone risking money in the markets trading a mechanical system should read this book. The book is more about evaluating trading system performance, but it also has some IMO very rational discussion about fixed fractional money management in the final chapters. Especially if you are into Optimal F, a risky proposition, that will be still risky but less risky after reading Stridsman (and I understand that Ralph Vince's latest book also addresses this).
  8. I'm not familiar with Stridsmans work. I will check it out.
    I have been wanting to read some of Vince's work and I am trying to get to that very soon.

    I am looking for some studies or methods on stop losses, trailing stops primarily but also other capital management areas.
  9. PowerST


    The Stridsman book I referenced in my previous post talks about stops placement. One of the five major sections of the book is titled "Getting Out", which seems to be largely about stops (I am jumping around in my reading of the book and have only skimmed that section so far).

    I am surprised this Stridsman book is not listed more frequently in books of essential reading. Possibly it is because the book is not easy going, either reading the book or implementing what the book recommends. But IMO I am finding this to be the one best book on trading system design that I have read so far (and I have read most of the well known books).
  10. The first reason I don't consider it essential reading, appears on page 37 of the book. Perhaps you might have a look at that page and see whether it dampens your enthusiasm for Stridsman's modus operandi.

    My second reason occurs in the first paragraph of page 80, in which he dispenses (imho) very bad advice. Have a look, see what you think.

    The book proceeds from a basic assumption so fundamental that Stridsman never even bothers to state it explicitly; he treats it as a universally-shared religious belief: The only worthwhile system testing software at the date of this writing (2001) is Tradestation. Since Tradestation cannot test multi-market portfolios using fixed fractional position sizing, this book will do all its tests one market at a time. Then at the very end we will fiddle around with Excel a little bit, to try to get a general idea of portfolio trading with positionsizing The assumption is untrue (Recipes, Behold, AmiBroker, PowerST, Excalibur were all available in Y2000 and all allowed portfolio testing with positionsizing) and the market-by-market results are not particularly relevant.

    There are more but I won't ruin them for you: read and discover. Just don't drink a glass of root beer when, e.g., reading the figure captions (such as Fig 14.1, 14.3), lest you experience a blast of involuntary nasal irrigation.
    #10     Sep 26, 2007