For one of my edges, I backtested the MM scheme you mention and it had bad resultz. It was better to increase size during drawdown or just keep it the same. :eek: -not a Guru
All the math (e.g., the Kelly formulae) says to do it the way I posted. And this guy apparently agrees:
False assumptions = GIGO, no matter how good the math MM when proving out a new edge != MM with an established edge :eek:
I don't know what acrary has said but I do know there's hundreds of different ways to use position size management. I've been using "dynamic" (different) position size for different types of price action scenarios very effectively for the past +15 years. The word "dynamic" to me implies I don't use the "exact same size" every trading day or every trade as if the markets (price action) never changes. Markets are always changing and one size fits all via using the same position size is poor money management. I say money management because position size management is a sub-category under money management. Therefore, when I mastered position size management...its probably the last big thing I had to master or its a tie between it and mastering stress (stress management) while trading and letting go of that stress when the trading day has completed. Simply, leave the stress at the office to prevent it from sabotaging the personal life. one size does not fit all
trading is an art, not science. people are mislead byindicators, TA,... they think in trading there is some science there. they back tested, try to assign a probablity about an setup/event, if that setup's probability is greater than 50%, then they think they get an edge. I was mislead by that too. since mybackground is artificial intelligence and software engineering. this training hurt my trading, make me treat trading like science. when I realized trading is an art, not science. I start to do trading very practically, or justfollow common sense. for example, buy low and sell high. treat each trade individually, my aim is win almost each time, not try to win statistically through a system. of course, it is difficult to define what is low and high, all based on gut feeling.in another word, scientific way to describe high and low. so I become a discretionary trader, all follow my gut feeling. I do not back test, I do not generalize, I get rid of the habit of writing journals. view trading as an exploring activity, when I feel something worth trading, I do it. I do not view trading as a regular career type activity. I raed through martin schwartz/jessie livermore's stuff many times. but I follow Martin's more, I donot think Jessise livemore's is good, he always make conclusions (that is not good). BE PRACTICAL BE PRACTICAL is very critical, the only thingh matters to me is make money nomatter what strategy I use. I donotcare about position size/trade management/setup/ideas, I am very practical, myonly aim is make money.
people come to trading often forget their goal: to make money not try to optimize a strategy not try to develop a system not try to find ways to control their emotions not try to design rules which a trader can not follow not try to write journals very simple make money very practical if an idea/gutfeel works, apply it
I am still in the proces of searching a true intraday method suited to my personality ... some people might be interested in the thought process though: http://localsfoolsgold.blogspot.be/2013/11/weekend-update-in-search-of-personal.html