Go to my site at www.Trade-Guild.net There are some resources there on risk management, but it is equity related, not a big deal. Any way, grab my email and email me and we can talk.
Thank you for the link and resources, but answering should be more simple than that, and I want to share it with everyone else, too. The simple question basically was: "Do you think it's best to invest with leverage on your own money or without leverage on borrowed money?" I could answer it myself - it's the same thing, except that with borrowed money, your broker could go bankrupt and you could lose it all. Also, you have to go through the trouble of getting a loan. Overall, I have decided it's better to go with high leverage (bigger risk) with my own money. I definitely sleep better that way.
OK, well my experience is a little different as an equities trader, no options. My opinion is this-you don't borrow money from a bank to trade a system. You are very judicious in your use of leverage. I use the "2% Rule" in which no position I enter (and I always look at my risk before my reward) will lose more than 2% of my portfolio's equity. This does not mean I have a 2% stop, I could, under the right circumstances have all of my portfolio in one stock-which I would never do. I don't believe in overdiversification either-it's simply a gimmick Wall Street has sold to sell mutual funds that have to have at least 20 stocks in them. When I'm not in sync with the market, and for trading systems, there will always be period like that-the Turtles themselves had years in which they lost money, but the system still worked, when I'm not in sync, I reduce that 2% per position to 1% or I go cash. Swinging for the fences is not a good idea, it is not a sound practice. 100% returns in (I forget what you said-a month?) are not realistic, they may happen from time to time, especially if you don't practice consistent risk management, but they are not reasonable. The 25% return you mentioned(I think) is a decent return. You have one thing going for you as an individual investor, an edge over Wall Street, and that is patience. You DON'T HAVE to be in the market and you can sit patiently and wait for the fat pitch. Most people can't do that because they need the action of the market, they need to feel like they are doing something to further their success and consequently enter less than desirable trades with bad risk:reward ratios. As for leverage, I use it when I'm hot, I forgo it when I'm not. I'd say these are the things needed to survive the market: patience, a decent risk:reward potential (I use 4:1 minimum), a maximum amount you are willing to lose (as a % of your portfolio) and I use 1-2%, good position sizing, don't over-diversify, don't trade highly correlated issues at the same time, when you find yourself in a hole, stop digging, don't swing for the fences, be quick to take losses, have a good exit system that is based on objective data-not arbitrary decisions, don't trade against the trend (except in a few limited instances), backtest your system over multiple time periods-as many as possible, don't use annualized returns to evaluate a system, and know exactly what you will do in your trade in as many circumstances as you can envision before you enter the trade. Finally, keep a good journal of your trades, why you entered, why you exited, and review them after a few months have past and never get down on yourself because you followed your rules and maybe exited a trade just before it took off to the moon. Sorry it's so jumbled and a little off the specific topic, but there you have it for the most part.
You guys need to start asking more questions about conventional knowledge and start testing them out. If you want to be making a living as a systematic trader, that's the minimum thing you should be doing.
Thanks for you lengthy advice, BT247. It's very interesting, even though sometimes it doesn't sound like systematic trading (in the sense of "automated" trading systems). It seems to me that your trading is discretionary, which does not mean you don't have a "system", in the sense of "method". In fact, when you speak of risk/reward, those values probably do not come from back-testing a mechanical strategy, but from live trading a discretionary one. So if this is the case, our situations are different. However, I still agree with or can understand many things you say. The 2% rule and similar precautions and safety measures all make sense of course, but having a very low capital, I'm faced with the decision to either play it safe and wait years before building up a decent capital, or take more risks and build up much faster. By "taking more risks" I don't mean some situation in which there will be a 99% probability of losing everything within a month. I mean rather a situation in which I take bigger risks for 6 months, and I have a 75% probability of getting away with it. In a sense, it reminds me of playing the risk strategy game. In some games, the strategy that wins in the long run is not the one you use, because in the long run you are dead. Because the guy who got Australia from the start built up faster and came to kill you. If I play it safe, I could die from natural causes. Then what was the point of investing to begin with?