How to avoid drawdown when you increase your position size?

Discussion in 'Strategy Building' started by Willleung, Nov 3, 2006.

  1. Sponger

    Sponger

    I read a very simple money management method for increasing position size by Trader Vic - does anyone have any comments on this:

    When you have a winning trade, you bank half the profit, and then take the other half and add it to your capital base. Your "new" higher capital base amount is what you then calculate your predetermined per trade lose percentage off of, and that of course lets you back into the appropriate position size to take per trade.

    Conversely, if you have a losing trade, you subtract that dollar amount from your capital base. Your "new" lower capital base amount is then used to calculate....etc....read above.

    To sum up, when you are winning, you are automatically increasing position size, but retaining 50% of your profits. When you are losing, you are trading smaller and smaller size as you go through a DD.

    Anybody use this simple money management method?
     
    #41     Dec 21, 2006
  2. Happy New Year!
     
    #42     Dec 27, 2006