Money management - the holy grail

Agreed .

One must have an appropriate mm strategy to cater for 80 % trend failures ,failure of junk science and failure of price action ,given there is random distribution of profits and losses for any given set of variables that define an edge. 2 % bet risk for first few trades is poor money management .

Bet sizes should be placed depending on probabilities , but not as high as 2% risk of account size.

 

I also think 2% is high in most cases. Most have a sound edge but trade small account. This is a good read --> http://tinyurl.com/6qzk7g5

 

I think 2% risk per trade is steep , Lose 5 trades in a row and your in a 10% draw . 10% draw over a 1 day timeframe is bad news to me.

.05% per trade is more in my comfort zone. 2% daily limit.

 

zr1 .... are you trading discretionary? What are the profit factors and sharpe ratios on some of your systems, or your career? (you don't have to answer that)

 

Good read.

If you have an edge , trader can still lose without sound money management.

If you have sound money management , you can do break even without an edge.

If you have unique money management and no edge (50/50) , you can be profitable , but I will let you do your own hard work to find it.

 

80% of trends may fizzle out, but the 20% of those that don't make me 100% of my money.

 

Random entry, 3x ATR trailing stop, risk 2% per position and wait a long time.......

 

Trade discretionary, profit factor on a longer term trend following systems that I have developed but not traded is around 1.14-1.35

Discretionary profit factor 1.89, been trading full time a little over 4 years.

 

random entry with the exception of counter trend trading , i.e not against real or strong trends .

There is a slight edge in strong trends .

 

Oh and I forgot, there was a long term basically buy and hold system I did test. Where I went long randomly with a crossover every day through a basket of futures with a 5 tick stop no matter what, Profit factor was >2 but drawdowns were unknown because I couldn't do portfolio backtesting. also spread and commish probably woulld have eaten it alive in real life since it only had a 1- 2% win rate. Thats the closest thing I've ever tested to "random" let winners run that looked like it might work . I gave up on automation.