a trader makes x % in a given week however his P+L swings up and down like a yo-yo what might be a stat for how much is too much ( i.e. this week I might make 3 % but when I tally in the ups and downs the total is almost ten times that ) yes I do either need to be very very careful in sizing and placement of my trades and perhaps need to take 25-50 % of my acct's value and place it in a bank CD so as not to give me any more rolaids moments
overleveraged and a blow up waiting to happen when a streak of bad trades strike. How long has the been happening ? Have you never had a losing strike pop up and drawdown the account severely ?
thanks ... not sure if that ( MFE MAE ) can be quantified in my case but it is something for me to look into on a weekly basis
Yep, overleverage and volatility. This is a forex example, but here's a fascinating look at how leverage changes return: http://www.pfxglobal.com/building-a-forex-trading-system/determining-position-sizes.html
That sounds like a roller coaster ride! I know the feeling all to well. Be careful, as us cowboys tend to lose risk management sometimes.
I also meant to mention that erratic position sizes can create the same effect. Brokers will tell you that a common denominator in traders who lose everything is inconsistent position sizes.
The stat to measure this is the Sharpe's Ratio (http://en.wikipedia.org/wiki/Sharpe_ratio) It is the measure of increased gain to increased risk. Essentially it is: (Return - Risk Free Return) / StdDev of Return A Sharpes of 1 means you are gaining as much over the Risk Free rate as you are taking risk. Under 1 means you are taking on more Risk than you are gaining in Return.