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You guys are confusing "Stops" with Money Management. They aren't the same thing. Stops are apart of a trading system. They could be tied to volatility or ATR or high and lows or trailing percentages or whatever. Money Management is bet size operating on that trading system. You should know that stops may not mean anything, especially when gaps occur. Don't bet more than 2%, come on, are you guys are also talking about 1% slippage. I use stops, but I don't consider that Money Management. Money Management is how leveraged my account is.
Kevin Campbell
In a message dated 12/1/03 8:42:30 PM Central Standard Time, palsanand@xxxxxxxxx writes:
Yes, I knew that. I would still not use any standing stops on day of entry, and use only mental stops.rgds, Pal--- In amibroker@xxxxxxxxxxxxxxx, "Ken Close" <closeks@xxxx> wrote:> Pal, thanks, interesting calculations. I assume you realize MFs trade> only at the close and "showing your hand" is not an issue. The only> real issue is trading too frequently and getting penalized and/or banned> from trading the fund in the future. I assume you know this.> > Thanks again,> > Ken> > -----Original Message-----> From: palsanand [mailto:palsanand@xxxx] > Sent: Monday, December 01, 2003 8:27 PM> To: amibroker@xxxxxxxxxxxxxxx> Subject: [amibroker] Re: Mutual Fund Money Management> > Assuming your usable_margin is the same as the total equity when you > start your trading, ie., $50,000.00, the > > AVAILABLE_EQUITY(AE) = 0.1 * USABLE_MARGIN (UM);> available_equity = 0.1 * 50000.00 = $5000.00;> > If you determine your Max_System_%_DD or Max_Trade_%_DD using AB Back > testing or MCS as 20% = 0.2> > POSITION_SIZE (PS) = AE / MAX_DRAWDOWN_% = 0.1 * UM / 0.2 = 0.5 * UM> > Position_Size = 0.1 * $50,000.00/0.2 = $25,000.00> > If you want to trade 3 MF's, then you would invest $8,333.00 per MF.> > Enter at opening range and/or at support/resistance depending on > where the current price is at. This automatically takes care of the > volatility. Mental Stops on day of trade at 1 full point away from > entry. Never reveal your positions. Exit after 20 minutes only if > your mental stop is hit and you are still losing. Never show your > stop on day of entry as this is equivalent to showing your hand in a > poker game and the specialist's would view that with glee. Use a > 3BSMA stop from next session onwards.> > rgds, Pal> > > > --- In amibroker@xxxxxxxxxxxxxxx, "Ken Close" <closeks@xxxx> wrote:> > Excuse me for asking a potentially dumb question, but what are some> > "accepted" rules of thumb for money management AFA mutual funds are> > concerned.> > > > I can see that you might risk say 2%, on a position, and know what > your> > stop loss would be, and then divide the price per share of the fund > by> > the loss level to approximate the number of shares to buy.> > > > But what about some of the other rules of thumb, like do not risk > more> > than 3% of total equity on a position. Or does this apply to the > stop> > loss? Seems like 3% might be a small (too small?) amount for a > mutual> > fund position. I do not know. It depends on the size of your > portfolio> > of course. What if you have a $20,000 portfolio? What if you have > a> > $2,000,000 portfolio. A $60,000 MF purchase out of a $2M portfolio > does> > not "seem" to be the right "proportion", or is it?> > > > Also, what about the inherent volatility reduction that occurs with > the> > multiple stocks in a fund?> > > > What about the number of funds to own at a single time? How would > you> > go about figuring this out, given high correlation among the funds?> > ....or given low correlation among the funds?> > > > Is it better to divide a given amount (say $100K) among two similar> > funds ($50K each) ,or is it better to plunk the entire amount into > the> > one fund? Would you increase the number of different funds given> > increasing size of total portfolio funds?> > > > Again, maybe a whole series of dumb questions but what do some of > you> > more experienced money management folks have to say for this? > > > > Thanks,> > > > Ken>
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