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Mark,
This is a futures thing. To minimize our risk of ruin, we only invest
one-third or our capital (or less) when determining our initial margin or
how many contracts we can afford to trade.
For example, the initial margin required to trade an e-mini S&P future is
$4,688. This means that we require cash (or bonds) of $14,064 in our
account for every e-mini we trade. Once we get to sufficient size, we scale
up to full size S&P futures contracts, which are 5 times larger. When
figuring out our positions, I, personally, always calculate on the basis of
e-mini contracts. Right now, my brother and I have the equivalent of 17
contracts in play. When calculating the number of contracts to buy or sell,
we always round down to whole numbers. If our calculations say we can buy
6.9 contracts, we default to 6, rather than squeeze to get to 7.
Guy
Paranoia...you only have to be right once to make it all worthwhile!
-----Original Message-----
From: owner-metastock@xxxxxxxxxxxxx [mailto:owner-metastock@xxxxxxxxxxxxx]On
Behalf Of Mark Thompson
Sent: Monday, July 10, 2000 10:31 AM
To: metastock@xxxxxxxxxxxxx
Subject: Re: Risk of ruin, amount per trade formula?
I have never understood exactly what you mean by a percentage investment of
your capital. If you only invest 33% of your capital then how does margin
come in to play? If that a futures thing? I trade stocks only and don't
completely understand the high leverage used in futures trading. Also when
the books say only to set your stops to limit your losses to 2% of your
capital does that mean a total risk of 2% or 2% for each of the several
sotcks invested in at the same time.
Mark
----- Original Message -----
From: "Guy Tann" <grt@xxxxxxxxxxxx>
To: <metastock@xxxxxxxxxxxxx>
Sent: Saturday, July 08, 2000 4:42 PM
Subject: RE: Risk of ruin, amount per trade formula?
> John
>
> Here I come from a basis of ignorance again, but is the Balsara book and
> charts we're using based on Optimal f? I'll have to ask my brother as I
> haven't received my copy yet. All I can say is, if it is, it appears to
be
> working for us since we've weathered two major losses without a problem
and
> are currently building some substantial equity positions. Granted, the
only
> thing we've done is reduce our investment to 33% from 50%. It has made a
> significant difference.
>
> Guy
>
> Paranoia...you only have to be right once to make it all worthwhile!
>
> -----Original Message-----
> From: owner-metastock@xxxxxxxxxxxxx
[mailto:owner-metastock@xxxxxxxxxxxxx]On
> Behalf Of John Manasco
> Sent: Saturday, July 08, 2000 4:57 AM
> To: metastock@xxxxxxxxxxxxx
> Subject: Re: Risk of ruin, amount per trade formula?
>
> I wish some of you guys would get on the Realtraders forum. They recently
> had a fairly lengthy discussion on the optimal f formula and came to the
> conclusion that it was not only worthless it would almost guarantee ruin
if
> implemented at the wrong time. But the better conclusion is to join the
> Realtraders discussion forum as they have some very bright professional
> traders who like to share their knowledge.
>
> John Manasco
>
> ----- Original Message -----
> From: Guy Tann <grt@xxxxxxxxxxxx>
> To: <metastock@xxxxxxxxxxxxx>
> Sent: Saturday, July 08, 2000 1:38 AM
> Subject: RE: Risk of ruin, amount per trade formula?
>
>
> > Thanks Glen.
> >
> > While all three of us have backgrounds in math, statistics and
economics,
> we
> > really haven't spent the time necessary to dive into Vince's books. I
> think
> > that's why my brother took the easy way out and went with Balsara's
> charts.
> > :)
> >
> > Guy
> >
> > Paranoia...you only have to be right once to make it all worthwhile!
> >
> > -----Original Message-----
> > From: owner-metastock@xxxxxxxxxxxxx
> [mailto:owner-metastock@xxxxxxxxxxxxx]On
> > Behalf Of Glen Wallace
> > Sent: Friday, July 07, 2000 6:49 PM
> > To: metastock@xxxxxxxxxxxxx
> > Subject: Re: Risk of ruin, amount per trade formula?
> >
> > To add to Guy's comments, Ralph Vince's first book, "Portfolio
Management
> > Formulas," has a comprehensive chapter on risk of ruin. His second
book,
> > "The
> > Mathematics of Money Management," contains a condensed version of his
> first
> > book in the first chapter, but glosses over risk of ruin. Both are
> > excellent
> > books and easily the most important books in my bookshelf. They are
not,
> > however, for the mathematically challenged.
> >
> >
> > ----- Original Message -----
> > From: "Guy Tann" <grt@xxxxxxxxxxxx>
> > To: <metastock@xxxxxxxxxxxxx>
> > Sent: Friday, July 07, 2000 5:20 PM
> > Subject: RE: Risk of ruin, amount per trade formula?
> >
> > > Sonny and Mike,
> > >
> > > I made an error here. We bought the following books from Amazon.com:
> > >
> > > The new Money Management by Vince
> > > The Mathematics of Money Management by Vince
> > > Money Management Strategies for Future Traders by Balsara
> > >
> > > The "Risk of Ruin" chart we're using came from the Balsara book
> (according
> > > to my brother). I'm ordering my own copy.
> > >
> > > I'm sorry if I misled anybody.
> > >
> > > Guy
> >
> >
> >
>
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