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MONEY
MANAGEMENT, ahh such a sweet controversial topic :-)))
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Can
somebody enlighten me?
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1)
With an avarage of 1% per trade (why per trade and not per position?), do we
have to trade 100 stocks? Anybody on this list having 100 actively-traded stocks
in their portfolio?
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2) At
1% per position one needs a sizable portfolio... 100 stocks priced at an average
of $20 and 500 shares would add up to $1,000,000 of actively traded
dollars. How many on this list do that? No answer expected
:-)
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2) If
you have 1% invested in 100 stocks and the whole market dives, so will your
portfolio, i.e. if 50 stocks track the market you'll be down 50%. So how does
this 1% protect you against whole market dips?
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The
answer to the above is probably that 1) you must diversify in stocks/sectors
that make opposite moves but this is probably more difficult than money
management, 2) that your perfect trading system should get you out of the
market in time. Doesn't this mean that 1) and 2) are prerequisites to MM and
most be solved before the application of MM?
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Now,
this doesn't mean I do not agree with money management :-) just that that the
way it is presented doesn't help the small tarder very much. Small (limited
budget) traders need to develop different typ of MM. <SPAN
class=046213313-23092003>What are the MM
rules for small traders?
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For
short term trading I like to think along these lines:
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1) Use
the best system possible; never stop trying to improve it. Aim for a high %
winners: it will keep you trading.
2)
Start each new stock small, a sudden large investment represent the risk of a
sudden large loss
3) Use
maximum loss stops that prevent you from ever dipping into your initial
equity.
4) use
profit stops, they can really improve system performance.
5)
reinvest profits to reach maximum positionsize gradually
6)
increase your position size in small increments by increasing
the Positionsize with 1-2% extra cash with each trade
7) use
all the tools available to you: know your trader workstation and order types,
use conditional orders.
8)
diversify over sectors and stocks
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With
AB version 4.5 we will probably see w whole new range of MM topics surface,
hopefully some that can be backtested better.
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Happy
trading,
<FONT face=Arial color=#0000ff
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Ps.
Yes, I have read some of the books on this topic but they all appear to be
written for fund managers, not for the small trader.
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<FONT face=Tahoma
size=2>-----Original Message-----From: Rick Parsons
[mailto:RickParsons@xxxxxxxxxxxxxxx]Sent: Tuesday, September 23,
2003 8:50 AMTo: amibroker@xxxxxxxxxxxxxxxSubject:
[amibroker] *OFF TOPIC* Position Sizing at GetFolio.comImportance:
High
There has been
much discussion regarding Position Sizing and how to implement it in
Amibroker. There is also a good discussion of Position Sizing in Van
Tharp's book.
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Here is a site
that uses Position Sizing as it's main feature:
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<A
href="" target=_blank>Http://www.GetFolio.com<FONT
color=#000000>
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Does anyone
have any experience with this site and subscribe to it?
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<FONT color=#000080
size=2>Thanks,
<FONT face="Vladimir Script" color=#000080
size=5>Rick
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