Position Sizing and Rapid Growth

Discussion in 'Risk Management' started by TraderZones, Jul 29, 2009.

  1. This represents a thread, spurred on by the "generosity" of someone who claims they will increase their acont from $700 to $200,000 in 65 days. Ignoring the fact that it will and cannot be done, and involves insane risk that only newbies and paper traders desire and dream about. But since for some reason, some paper-trading wellwishers are cheering it on...

    To take away the temptation of commercializing their venture, we will be publishing here every published rapid-account technique known to trading humanity. So you don't need to buy anything before taking a chance to lose all your money also...

    And in reality, if it is making "progress" for any length of time, then you are not getting the real account statements. Without "I am going long/short" now posts on ET (time stamped) - then the experiment will be all trickery...

    Now, Trading Tricks of the Insane

    Hold&Hope (aka Hold&Pray) - not really a rapid account growth method, it is where the trader/vendor refuses to take a loss (against every sane industry advice - cut your losses short). These work for brief periods of time, and then blow up in your face. Auditing sites are gathering places for such disasters in waiting. Provides no edge, and refuses to take the competent loss. Eventually, probability catches up and will blow out the trade and possibly the account. This is a very common method.

    Averaging Down/Up - The trader keeps adding to an existing position, hoping to cause the average entry price to be better. Provides no edge. The price is much more leverage and much larger per-trade drawdowns. Does not work for long. In leveraged trading, only newbie traders, con artists and madmen do this. There is no such thing as a free lunch.

    Scaling Up/Down - supposedly, a smaller variant on averaging up/down. It make the entry and exit price look better, at the price of more leverage and larger per-trade drawdowns. There is no such thing as a free lunch.

    Pyramid Your Profits - THIS is likely the method of our "make your account 20X (2000%) bigger in 65 days". This DEFINITELY in leveraged trading, is the realm of newbie traders, delusionals, con artists and madmen. Looks fine EXCEPT, you are adding phenomenal leverage. Imagine holding 1 ES emini with $700. At a level of 1,000, this represents $50,000. That is about 71 leverage factor. For ONE contract.

    The gimmick? When you make $700 in profit, get another contract! THIS is likely how this will work (even though it won't). Except again, you still have 71 leverage factor. A margin of 1.4%. A housecat controlling a grizzly bear.

    So you need to be right, almost every time. No margin for error, on each and every of the many trades that are about to happen. If you don't have perhaps the best edge in human history (even then no guarantee), the odds of 2000% increase in 65 days against you are likely trillions to one or higher.

    Expect a website, blog "PM me for details" or other method to try and sell it, but best guess is this is likely all you are going to get - "Add on another contract with each $700 (or other level) in profit". And since this attempt won't work, ANY sign that it is going profitable will bring the come-on. And when it fails, there will be a new thread and new alias(es) to try again.

    The problem is, these are all Smoke-and-Mirrors Tricks. They MAY work, until they crash and burn. Traders who actually make money run in the other dirrection, because they know it is more important to keep your money than to make money.

    FUTURE POSTS: Martingale/Anti-Martingale strategies, Fixed Ratio, Fixed Fractional, Optimal f, Kelly Criterion
  2. Redneck



    Probably sticking my nose where it don’t belong – but why not let him be…

    He’ll either succeed or fail – then we’ll all know

    In the meantime none of us are out anything…

    It’s like picking at a scab Sir – it never gets any better.. just sits there and festers

    Now tell me to sit down and shut up – I will

  3. I have no plan to tell you to site down. The driving reason for the other stuff, is most likely a desire to commercialize a simple yet catastrophic idea . I am taking away the temptation and trying to spare some newbies the financial disaster that ensues when trying to follow "put your retirement savings on number 86" (which by the way, probably has a 100 billion % better chance that turning $700 into $200K in 65 days without blowing out.

    It is scary how many paper traders people actually expect this to happen. Like a blind 4' 6" high school basketball player with no hands expects to star in the NBA. He may have a better chance.

    Again, this thread is to publicize reasonable position sizing and disastrous rapid portfolio growth methods. All available freely on the net.
  4. mon


    I agree with everything TraderZones wrote

    however I am sorry TZ you are still an ignorant older gentleman

    with no trading skills whatsoever
  5. martymjp


    Put it to rest. Place some real time trades for us and show us your skills.
  6. The only way to use leverage to grow astronomically is to allocate that leverage to uncorrelated strategies which by your immediate financial requirement is via an infinitely short timeframe... something not possible in 99% of all liquid markets...
  7. Here is an excel (old version ET does not take up to date Excel)

    It is titled sicktrader/30 mintrader as a reference to the old 30 min a day trading.

    I followed his rules with further restrictions.

    Only one winning trade a day on the opening range BO with his stop of 2.5 points and target of 3 pts only. This will make the time pass more slowly.

    I realize an opening range BO is complex and requires a conservative eye. But I poker player can read cards and other players, can't he?

    Further I did not add contracts until week's ends; hence the day multiples of 5.

    If we popped this on a semi log chart along with the ATR curve it would nicely show the efiiciency compared to the market's ATR offer.

    Ohh and if the trading was just taking the PM BO, I will show a print for one of those BUT it takes the whole trade without setting a target. This reduces the trading market time to 12 hours or so for the whole 200,000 assuming a guy has 20K to trade. I know lousy money management. LOL


    I guess an excel will not pop as a pic, sorry.
  8. Here's what cutting to the chase with five trades like this would look like.

  9. Lets look more closely at the difficulty of not entering until the opening range BO occurs.

    We are faced with several difficulties. The opening bars can sometimes be as volatile as the target and stop that was set.

    Further, if a person chooses to do the opening range breakout beyond a beginner level he is going to enter with a subfractal signal that is within the oopening range AND be independent of price measurements.

    We can also see that any other adjunct, in terms of leading indicators of price, also occur before the BO and are terrific. There are seven of these. Letting them flow in the order of events that they portray is like insurance.

    So these entries are going to be coatail entries of the smart money and the DOM wall that could complete meeting the first trade profit taking will not even come into the picture.

    The exit for the day (I am restricting a sloooow trading regime of one trade per day) will come before the stop is tightened from 2.5 down to 2.0 points.

    There are some other neat things that are not part of making the 65 day run to 200,000. It will be before most 10am news and before the first internal on the first dominant traverse of the first channel of the day.

    Lets take up failures to BO on the open. If a person is a poker player and setting a traget than can be met before the river even flows, what is the deal? The whinning is all about managing money on high leverage, presumably. Sick has stated he will put more chips on the table to get the initial move of the daily range expansion if he blows it and gets stopped out. LOL

    What is this poker player really doing? Well you guessed it rather slowly and he has been laughing. He is playing with the smallest chip he can to begin to play. He cuts his leverage as much as possible BEFORE he even ups the anti.

    I think it is very funny that he has played all you guys as he has. He kept flashing dirty cards to keep YOUR eyes off his vey conservative strategy too.

    Minumum bet; minimum raise. You guys got taken from the first card played.............LOL......

  10. ehorn


    I thought is was rather conservative too... lol!
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    #10     Jul 29, 2009