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Hi Eric,
Let me share my views and my trading style with you. I hope this can be of
some help to you. When My trading system gives me a buy or a short sell
signals, before entering, I analyse entry price and stop loss price, then I
calculate how much capital is required to enter this trade and how much is
risk capital for entering minimum of 100 shares or in futures(Here in India,
we trade in a lot in futures that is diff for diff stocks).
Then I calculate approximate projected target and an approximate time to
achieve that target for that particular stock before entering into a trade.
I emphasise on the following rules:
1. Risk/Reward ratio must be 1:3 or higher for the trade.
2. Projected Monthly returns for this trade should be 3% or higher on
capital invested(In case of futures, we need approx 20% capital of total
trade value as margin money and in case of trading in shares, we need 50% -
100% capital of total trade value. So, return of 1% in case of future can be
a return of 5% on capital invested).
3. Capital to be invested in a particular trade must not exceed 20% of my
total capital for the first trade to be entered. If it exceeds, I don't
enter that trade.
4. If a trade moves in my anticipated direction, I keep shifting the
trailing stop loss.
5. If the stock prices continue to move up or down my expected direction, I
wait for next consolidation to happen. After a consolidation, when the
prices breakout again in same direction, I enter second time into same trade
at higher price and keep shifting trailing stop loss for all lots or all no.
of shares I hold.
Sometimes I hold the stock even if my trailing stop loss fires until my
trading system gives me a definite exit signal or short sell signal. This
way I may lose some of the profits if I get stopped out, but following the
trading system, It saved me most of the times exiting at premature levels
without taking full profits.
If Exit signal occurs before firing of trailing stop loss, I exit
immediately without waiting for stop loss to get fired.
Thanks and Regards,
Amit Trivedi
President & CEO
Athenasolutionz.com
----- Original Message -----
From: chichungchoi
To: equismetastock@xxxxxxxxxxxxxxx
Sent: Wednesday, April 19, 2006 6:36 AM
Subject: [EquisMetaStock Group] Expectancy Vs Money Management
Does anyone would like to share any idea on how to select the trading
strategies based on expectancy vs money management?
For comparing strategies, I always select the one with highest
expectancy, but when I also need to consider position sizing into the
selection criteria, then I don't know what to do?
Does anyone know on how to balance between expectancy and money
management [the size of position] in order to select the best strategy
for trading?
Thank you for any suggestion
Eric
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