Kelly Criterion & Risk Of Ruin As Risk Management Tool

Discussion in 'Risk Management' started by ironchef, Jul 4, 2017.

  1. ironchef

    ironchef

    I am afraid that is correct. My equity holdings are not hedged and without stop losses. So, theoretically I can lose everything. But I have not hedged or put stop loss on my equity holdings for as long as I remembered. Recently I tried stop loss on AAPL, FB and BABA with very bad outcome so I essentially stop doing that.

    You probably will say I live dangerously.:D

    I am having a lot of difficulty reading charts and try to find order out of what seemed random ups and downs. Oh well, I will keep trying since I don't have a day job and have plenty of time on my hand.

    Cheers.
     
    #51     Jul 9, 2017
  2. MrScalper

    MrScalper

    Are you trading shares..options..or both?

    If you are trading shares..buy and hold..without stops..then that is a very bad habit to get into. It is fine to trade with no stops when daytrading..as you can be in total control and react to what price is doing..not for the wishers and hopers :)

    What are you looking for when you look at a chart..if you don't know then why are you even looking?
     
    #52     Jul 9, 2017
  3. ironchef

    ironchef

    I day traded shares in the early 2000, switched to swing trade shares very quickly but since 2013 exclusively trade options.

    For me, trading options means directional bet so entry is critical. If I can get a better entry from reading charts, it should improve my results.

    Regards,
     
    #53     Jul 9, 2017
  4. Mtrader

    Mtrader

    I trade only futures so was thinking about that, not options.

    But even in options it is true. You only know the drawdown of 1 entry, which is the loss of the premium you pay. But you never know with certainty how many losses you will have in a row. So options trading doesn't solve that problem.

    You have to follow the rules of your system, which means that you have to take every trade no matter what the total outcome till then is. Stopping after a huge drawdown is no solution because when you start to trade again the risk just continues and the drawdown can continue too. Only stopping to trade for ever can solve the problem.
     
    #54     Jul 10, 2017
    ironchef likes this.
  5. MrScalper

    MrScalper

    Can you post details of one option trade as follows..

    Underlying
    Month/Date
    Strike
    Call or Put
    Premium paid or received
    Date and time of entry
    Projected hold duration


    If the trade has 2 legs..then details for both legs are required.
     
    #55     Jul 10, 2017
  6. MrScalper

    MrScalper

    We are talking about current risk with current open positions..not future trades!
     
    #56     Jul 10, 2017
  7. Mtrader

    Mtrader

    So in futures ES there is no current risk and no open position????? :wtf:
     
    #57     Jul 10, 2017
  8. MrScalper

    MrScalper

    Are you drinking alcohol or what!

    Go back and read the posts..as I do not repeat myself :)
     
    #58     Jul 10, 2017
  9. ironchef

    ironchef

    I don't trade AAPL options. Here is one long (I also traded other longs and shorts at the time) trade I made in June:

    GILD
    Jul 14
    $64.5 (~Around ATM)
    Long Calls
    ~Around $1.50
    ~Around mid Jun
    I plan to use the proceeds to buy some underlying and own them long term.

    I had been watching GILD for about a year and decided to pull the trigger ~$65 per share mainly based on fundamentals.

    Right or wrong this is how I trade. I incorporated part of the philosophy and concepts of Handle123, drcha, among others (those kind enough to answer my questions) into my own methodology.

    I tried to study monthly, daily, 30 min, 5 min, 1 min and even ticks GILD charts for good entry signals but it was difficult to discern which and what are the correct entry signals since there are so many and real time is so different from backtest.

    Regards,
     
    #59     Jul 10, 2017
  10. MrScalper

    MrScalper

    Does this mean you are still long the Jul14'17 64.50 Call from $1.50?

    What makes you think GILD will not pull back more before expiry..and why are you so certain that you will be able to use the "proceeds". Do you know something that we don't?

    upload_2017-7-10_18-39-9.png
     
    #60     Jul 10, 2017