How to never get an account wiped out?

Discussion in 'Strategy Building' started by gg12, Jan 9, 2007.

  1. gg12


    Independent of your strategy money management is most critical to a successful trader.

    What about designing a structure which only works on percentages?

    Once a loss occurs the account is for example at 50%. After the next loss it's 25% (then 12.5% ....). But never 0.

    If there is a winning streak the account will scale up nicely.

    As long there is an edge during the livetime of the account (which is theoretically endless) the account will grow anyway.

    What do you think?
  2. monee


    The section under gamblers ruin in wikededia is applicable to one of the things to do for profitable trading.

    Especially the part that starts with " A casino generally has: "
  3. Keep your account size small. Take the profit out on a regular basis & enjoy yourself!
  4. Have a look at fixed-fractional MM.

  5. You shouldn't have to lose half of your money to realize that you're in a bad trade(s).
  6. gg12


    Thank you all. Great information, also on wicki

    I found and concluded (but still reading and exploring further):

    Betting strategie
    - increase odds of winning
    - produce long term profits
    - from often loss making activities

    Exponential growth
    - grow rate of an account; maximal possible growth
    - total starting amount irrelevant

    Kelly criterion
    - but best must be infinitely divisible
    - bet higher fractions if edge is bigger
    - don't bet, if your chance is only 50:50
    - F*= 2p - 1 (for example 60% win prob. -> bet 20% of amount)

    I have made a start with a 100% investment some weeks ago.
    Quickly I have lost 78.24% (01/03/07). Now I want to get back to 100% and make sure that I don't loose the full 100%. In addition I want to grow to account as much as possible.

    I had good days on 1/4 +13.0%, 1/5 +5.7%, 1/8 +11.2%, 1/9 11.4% and I am currently at 32.82% of my original investment.
  7. Increasing probabilities of successful trade:

    1) Dont bet against the Linear Regression Slope (long term) and short term.

    2) Bet with the LR slope when both LR (long term and short term) are pointing in the same direction.

    3) Wait for a retracement on your entry calculated to be in the Linear Regession standard deviation channel.

    3) Place stops according to charts, near support and resistance. But not at those levels. A few units away.

    4) Let the TP be faraway. Let the winners ride.

    5) Look for timed price progression, meaning take a staggered view on prices and see if progression is taking place.

    6) Risk 1% or less on a stop loss of account equity.

    7) Have the Macro economic scenario in your favor.

    8) Have other markets correlate with your trade.

    9) Dont step away, unless you've defined your risk exposure.
  8. toe


    without leverage survival is simply a matter of some form of fractional bet size. its leverage that dramatically increases your risk of ruin. it needs strong strategies and management.

    if you have a system that suffers from autocorrelation of returns (all systems have some ) then a negative martingale type position sizing would make sense.
  9. Your "results" are very volatile. You're probably badly undercapitalized and/or violating your own rules regarding the limiting of losses.
    #10     Jan 10, 2007