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On Fri, 2 Mar 2001 16:16:28 -0500, you wrote:
>unless I totally don't understand the query, i'm not sure what role
>expected-profit calcs have in money mgt (i presume mm = risk exposure stop).
>
>mm would be more a function of risk inherent to the specific trade (distance
>from stop-out to entry as a % of portfolio), which is a fn of market price
>action and not profit expectation.
>
>put another way, profit (expected or realized) = return, whereas money mgt
>deals with the "risk" in the r/r equation.
To point at my "problem" more precisely, I should switch from profit
calculation to calculation of the "amount of money to risk" (AOM2R):
My mm calculates the AOM2R, when a OPEN signal shows up in my system.
(AOM2R calculation is done based on the "probability" distribution of
wins & losses from past trades of the given system.)
So, at _open_ time, I need to know the number of contracts, which
represents this given AOM2R, which is not a problem for long
positions. For short positions, however, the AOM2R can be calculated
a-posteriori only, because AOM2R = No of contracts * _close_ short
price.
So this results in a dilemma for AOM2R calculation (not for profit
calculation in general) for _short_ positions, and I wonder how this
is solved by other traders.
To avoid the above dilemma, I use AOM2R = No of contracts * _open_
price up to now also for short positions, but this is not correct,
because it results in much too small AOM2R values for successful
trades, thwarting my mm considerably for short positions.
Any suggestions?
mfg rudolf stricker
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