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I have eight trading systems, but only use one or on occasion a second one.
I use fixed ratio money management strategy. And I am constantly testing. I
normally trade with leverage. My testing shows that reward increases faster
than risk, until the optimal F is reached. Although I use fixed ratio, I
have done enough work with optimal f to know that I'm trading well down from
the optimal f.
And Mickey, my trading system frequently has many serial losers. It is just
that they are small losers. My # of winner vs. # of losers ratio is not much
better than 50/50. My average win/average loss ratio is pretty good. And I
thoroughly test for positive expectancy before I enter. I look at past DD
percentages and largest loss % prior to entry. I believe that virtually
every stock trades a little differently. My system is very sensitive to
money management. I'm tending to go for the big kills. As a result, I have
the huge draw-ups and sometimes numbing drawdowns. I like to diversify over
about 20 stocks, since a complete collapse in one due to fraud or whatever,
will at worst result in a 5% portfolio loss. The analysts always love the
stock right up until the story breaks.
My portfolio looks like a lesson in Darwinism. As I build a portolio, I sell
the poor performers and hold the top perfomers. I build a portofolio of
strong winners by selling the losers. That is where my serial losers comes
from. The remaining strong stocks then generate the big wins. That is where
the big profit/loss ratio comes in. When a correction starts, I sell the
winners and then wait for the next uptrend. If the correction is swift, I
get a nasty drawdown.
I could probably do better if I mixed in some futures, ie. something less
correlated. I haven't had time to develop any systems for trading futures
and haven't opened a futures account. ( another learning curve to travel).
That's the next big project, ie. adding futures trading. Right now, I'm just
happy to have my taxes done and am waiting for Equis to get a bug free Meta
Pro 7.02. I want to do more with analyzing multiple time frames.
(ie.integrating intraday swings, daily and weekly) System testing won't be
easy for multiple time frames.
Yes, I have read some Larry Williams articles and plenty of others. I have a
small library of books and magazines on trading. There are plenty of good
trading ideas right on this list. The bottom line is that you have to
develop something that you have confidence in, including mathematical proof
of what you believe.
Kevin Campbell
In a message dated 4/19/00 1:38:41 AM Central Daylight Time, grt@xxxxxxxxxxxx
writes:
> Kevin
>
> We have been trading for too many years. Between my dad, my brother and
> myself we have over 125 years experience. All that without much money
> management to speak of. Thanks to this group and their help, we have
> started to add money management rules to our trading and have successfully
> weathered two bad trades (not sequential losers). With our current trading
> system, we can go back 18 years for back testing, but have specifically
> stayed with the last 5 years.
>
> Our money management rules are based upon our actual trading results. We
> then take all of the factors into consideration, apply them to a table in
> one of our books and trade at a risk of ruin level of 0. We feel fairly
> confident with our system, so feel that our money management rules suit our
> trading style and our system.
>
> I don't look at our trading as gambling. If I felt it was gambling, I
> wouldn't do it. I feel that we definitely have an edge.
>
> Now my brother and I just added stock trading to our portfolio. He started
> the end of last June and is doing quite well. I started trading a week or
> two ago when we had the largest NASDAQ drop in history. I chickened out
and
> closed half of my stuff out at a substantial loss. Should have waited as
it
> all came back. My second foray into stocks was last Friday, but I got
smart
> and didn't buy anything on margin. Held on through the big drop on Friday
> and have enjoyed a couple of big days up. I don't select 1 stock and put
> everything in it. I have 18 positions and they are up almost 30% in 3
days.
> I am within $5k of being even, no thanks to my closing out those stocks.
> Now I'm waiting for the sell.
>
>
> Guy
>
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