Hi All, So one thing I have been experimenting with is concepts around diversification and compounding. I know that there are many professional traders around that say using un-banked PL to make trades is a terrible thing to do, however I would like to get opinion of any others who have also experimented in this or have past experience. Do you know of any web resources which might be useful? Are there any well know industry approaches to this out there (such as correlation tables)? What are your thoughts? I realize this is highly subjective question as their are many contributing factors. I'm just trying to get a better idea of what they may be so I can account for them better. Thanks.
Your description, applied to the same instrument producing the unrealized, is one method of "pyramiding". As an intraday-only, flat end of day futures trader, pyramiding is something I do not do. IMO it is more appropriate for swing or position trading. I am an all-in, all-out (or reverse) trader. With total round-trip commissions of less than 1-tic per contract (and less depending on monthly trader volume, depending on broker) there is no purpose in simultaneously taking on additional duration and leverage risk. Especially with unrealized money! All-in, all-out is mental clarity to me. Being able, financially and mentally, to recognize and to put on the next trade, whatever that is, matters. If that's reenter/repeat in the same direction, it's fine with me.
I always viewed my Net Liquidating Equity as my equity-good or bad. To me the concept of realized and unrealized are only important for taxes.