Based on my own trading for several years, and all the books and research I've read out there, it seems to me that the two biggest reasons for trading losses (and ultimately failure) are incorrect position sizing and not keeping stops properly. All the other "sexier" things like entry set-ups and market timing get the attention, but the reality is that if traders kept proper stops and sized their positions properly (i.e. proper money management), their odds of making money would be much higher. The problem is that most traders don't have the discipline to do these two basic things right. So here is my question. Why isn't there a trading platform out there that does this for traders by default. i.e. instead of giving traders the most features and flexibility possible, TAKE AWAY features and flexibility when it comes to stops and position sizing. Make the trading platform very simple and inflexible in this one aspect. Simply give traders 3 options (low, medium, and high risk/reward) and then have the platform size their positions automatically based on an algorithm that looks at their account size and how far away their stop is for any trade, and sizes the positions appropriately with very low risk of ruin possible (even in the higher risk option). Also, make the platform not allow you to trade without a stop loss, and if you widen that stop loss during a trade the platform auto-liquidates part of the position to keep your risk constant. So this platform would take care of stops at all time by default, and also not even give you the option to deviate from a sound position sizing strategy. Of course such a platform wouldn't be for profitable traders and pros, who would want more flexibility. But for all the newbies and struggling traders out there that continually sabotage themselves, wouldn't such a trading platform improve their odds? Just a thought... Let me know what you guys think. I wonder if any newbies or struggling traders would even appreciate such a platform and trade through it, or would they insist of having all the "freedom" that ends up hurting them.
apparently the first 100 people to see this thread don't think this is a great idea. or they just haven't realized the genius of it. lol
I'm not suggesting money management is not an important part of the equation but even perfect money management has no value unless you are trading setups that have a positive expectation. Part of having that positive expectation is using the appropriate stops for the setup, trade location, vol etc. Stops go hand in hand with the trade while money management is what profitable traders use to stay in the game when those same setups hit the invariable streak against them.
I'm guessing you're one of those guys who was breast-fed until 12, had training wheels until 16, and rode in a car seat till 20?
If money management is key ,why is it casino's win at roulette , they have almost no control over what size of bet and when and yet they end up ahead, how is this poissible?
if all you ever did was buy above a bullish trend bar and set your stop and target to the same amount of points this is what would happen. 50/50 forever. The point is just to illustrate how effecient the market is and how everybody should be at least breaking even minus commish and spread. Now just figure out how to buy low and sell high and you should be ok. **whats interesting to note is that every trade was a buy on the dow index and this was during a huge bull run in that time period and it didn't mean a damn thing. <img src=http://www.elitetrader.com/vb/attachment.php?s=&postid=3560036>
False. Casinos set a maximum bet limit at the roulette table, effectively having control over the size of bet placed. This prevents people from being able to martingale indefinitely (assuming a large enough bankroll) and combined with the 0 and possibly 00 spaces gives the casino favorable odds over time. Without controlling the maximum bet the casino would give up its advantage to a player with a very large account size.