I've seen so many people say that the secret to profitable trading is money management. Ok...we all have our secret formulas for picking winning trades. But are money management techniques a secret? Can anyone share their ideas on money managment or give some "war stories"? SM
This is new to me and I dont have Trade Station yet but I believe MM techniques can be back tested in Trade Station based on set entry and exit signals. The general idea is to systematically increase trade sizes as account size increases and reduce as account reduces.
"set entry and exits" imply's that a back tested strategy is in place and will be adhered to (prefer automated) during to course of the MM strategy.
Who said this? Some wanna be "famous" author? Its BS. There are no secrets. Seriously. No amount of sophisticated money management will help a negative expectancy trading rule. Money management will not make a losing system into a winning one. Money management is a risk management system. Once you have a positive expectancy system, then you apply MM. Not the other way around. Plenty of threads on ET, wilmott etc etc that discuss MM in depth.
Yes and no. First, i agree that money management will not turn a bad system into a winner. But a sound MM will foster a good discipline, especially when it comes to cutting your losses before they spiral out of control. Obviously, making money is important. But not losing what you have is even more important.
Indeed there are tricks. And treats. But as the previous responders so rightly said, first you must have a robust system. The primary trick is using backtesting optimization to match the system risk to your personal comfort zone. The resulting treat is that you trade effortlessly and without anxiety.
Its true. A plan with a positive expectation should be any traders first priority. Second would be a means of implementing that plan without hesitation or alteration. MM would have to be third on the list.
I would like to know if there are any Trade Station users out? To my understanding Trade Station has a money management optimizer that can be used on any strategy (positive expectation) to determine the best MM strategy.
Sorry for the confusion. It was a given that there is positive expectancy in the trade. But it is my understanding that poor money management can really limit gains, or even cause systematic losses in an otherwise good system. So I agree with what you're saying...you're reiterating what I was trying to say. I'm trying to find some mm tricks that will help me. Hopefully others don't view those as proprietary. SM