NexusFi: Find Your Edge


Home Menu

 





Help me clear up some money management misconceptions.


Discussion in Psychology and Money Management

Updated
      Top Posters
    1. looks_one vegasfoster with 1 posts (0 thanks)
    2. looks_two Jeddy197 with 1 posts (0 thanks)
    3. looks_3 Quick Summary with 1 posts (0 thanks)
    4. looks_4 kevinkdog with 1 posts (0 thanks)
    1. trending_up 1,289 views
    2. thumb_up 0 thanks given
    3. group 2 followers
    1. forum 3 posts
    2. attach_file 0 attachments




 
Search this Thread
  #1 (permalink)
 Jeddy197 
Spartanburg, SC, US
 
Experience: Intermediate
Platform: Ninjatrader, MT4
Trading: Forex
Posts: 7 since Jul 2013
Thanks Given: 4
Thanks Received: 1

This is sort of a broad question, but here goes.

Am I mistaken by thinking that money management (trade management/lot sizes/etc) are much, much more important than actual trading methods or systems? I know people generally focus on signals for entries and exits, but it seems that if used effectively, money/trade management could almost be used as a sort of system in itself.

For example, could you not just find the historical range data for a given TF, where the range is measured from each successive higher high or lower low. It seems that if you found this data for multiple years, you could also calculate the historical range for any given hour of the day. Now obviously the actual ranges will vary from the historical ranges, but I'd assume there would be some significant level of correlation.

So with this historical range data, you could enter a trade at a higher high or lower low, and set your SL and TP according to what the historical range data says you can expect from this trade. In other words, if the historical range data shows that at 7PM the mean range is 11 pips, you wouldn't want to set your SL and TP at 30 pips.

And back to actual money management, you could also use this historical range data to help scale into trades.

I've just been looking at the "PriceActionSwing" indi, and it got me thinking about entering trades without a conventional "entry signal".

Sorry if this all sounds like rambling or doesn't make sense. It makes sense in my head...somewhat .

Started this thread Reply With Quote

Can you help answer these questions
from other members on NexusFi?
Elite Trader Funding, Avoid?
Trading Reviews and Vendors
Pivot Indicator based on Level2 data
NinjaTrader
Pivot Indicator like the old SwingTemp by Big Mike
NinjaTrader
Forcing plots to disappear/reappear?
NinjaTrader
Brendt Skorupinsky
Trading Reviews and Vendors
 
Best Threads (Most Thanked)
in the last 7 days on NexusFi
ApexTraderFunding.com experience and review
98 thanks
HumbleTraders next chapter
56 thanks
Winning attitudes create winning traders
38 thanks
Vinny E-Mini & Algobox Review TRADE ROOM
23 thanks
Learning to Trade with the Big Money
22 thanks
  #3 (permalink)
 kevinkdog   is a Vendor
 
Posts: 3,668 since Jul 2012
Thanks Given: 1,893
Thanks Received: 7,377


Ralph Vince, of the optimal-f fame, claims that 90% of a trader's performance is due to money management, with the remainder of performance due to the entry and exit signals.

Van Tharp always talks about a study that was done with a bunch of non-finance PhDs. All given the same positive expectancy trading system, almost all of them lost money in a simulation type contest. Reason: poor money management.

Concrete example: My latest Combine attempt, documented here, shows this point pretty well. I broke even, with some big swings, using varying position sizes. If I had kept position sizing small and constant (ie, no real money management), I would have ended with more profit, and less variation along the way.

I think most traders, myself included, do not focus enough on money management.

Follow me on Twitter Reply With Quote
  #4 (permalink)
 vegasfoster 
las vegas
 
Experience: Intermediate
Platform: Sierra Chart
Broker: Velocity/IB
Trading: 6E
Posts: 1,145 since Feb 2010
Thanks Given: 304
Thanks Received: 844

You're on the right track, but the basic conundrum with pure money management based strategies is that there are more bars in the direction of the move so you are scaling at a disadvantaged price, e.g. if price is going up then you are either buying high on more bars or buying low on fewer bars. You can overcome some of the weaknesses through incrementing, decrementing, or adjusting the frequency of the scaling, but so far all of my efforts have still exhibited a bias toward either movement or chop, and extreme instances of the other will eventually wipe me out. Also unfortunately, I have found that extreme instances occur with sufficient frequency that doubling the account is not guaranteed before wipe outage occurs. Maybe you can do better

Reply With Quote




Last Updated on July 31, 2013


© 2024 NexusFi™, s.a., All Rights Reserved.
Av Ricardo J. Alfaro, Century Tower, Panama City, Panama, Ph: +507 833-9432 (Panama and Intl), +1 888-312-3001 (USA and Canada)
All information is for educational use only and is not investment advice. There is a substantial risk of loss in trading commodity futures, stocks, options and foreign exchange products. Past performance is not indicative of future results.
About Us - Contact Us - Site Rules, Acceptable Use, and Terms and Conditions - Privacy Policy - Downloads - Top
no new posts