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Tom and/or Roz wrote:
>
> Also, do you have a formula of total $/% to equity
> at risk ? I believe it was you who mentioned the 8
> oats vs 1 yen to keep things constant with about a
> 1-2% of equity at risk. Does that mean across 5
> markets then you might risk 10% on any given day
> or is that too high.
>
> Your post was terrific. Thanks..
> Tom B.
Tom:
I set my personal risk levels all relative to a bond contract, where a
risk 'point' was equal to one thousand dollars. Then by building a
matrix with an average true range [I actually look at both the current
7 and day atr and compare that with the historical levels of atr's for
that commodity. That way, if something I am about to trade has an
abnormally low atr, I'll adjust the atr up to more historical levels.
Similarly, if the atr is too high, I may just pass the trade, because
of the excessive volatility], I solve backwards using contract specs
so that all contracts have a point value for a stop that equals $1000.
This lets me set equivalent risk.
I usually risk just about 1 percent of my account per long-term trade,
and if I find five really good trades, I'll take all of them at that
risk level. But if I have three really good trades on and a mediocre
trade shows up, I'll most likely pass it up. As I said before, I don't
add to my trades. I don't like to dilute a winner and adding to a
loser, for me, just isn't acceptable. I know pyramiding works for some
folks, but I like it simple and clean.
If this isn't clear or you want finer detail or an example, tell me
and I'll try to post an example of an equivalent risk matrix.
Tim Morge
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