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"Owen Davies" <owen@xxxxxxxxxxxxx> writes:
>On thinking about it a little more, I think what has me looking for some
>sophisticated, possibly even mystical, approach to money management--
>as opposed to entry and exit strategies--is the reputation of the Turtles.
>I have often heard it said that it's their money management techniques
>that distinguish them from other trend followers. I have heard this said
>of other top traders as well, but it's reports of the Turtles which first
>led me to wonder about this.
>
>Which brings up an obvious question: Does anyone here have any
>sense of what these folks do that others don't?
>
>I wouldn't ask anyone to reveal proprietary information, but without
>going that far, maybe someone can at least tell me whether there is
>a valid issue here at all. I know about asset allocation as it applies
>to stock/bond/fund/etc. portfolios (and find it darned tough to apply
>to futures trading.) I know about minimizing risk and mazimizing the
>reward/risk ratio. I have what I think are some pretty decent ideas
>about how to scale in and out of trades, and whether or not to do so
>at all. Does that cover what the Turtles were/are doing, or is there
>some other form of money management that I should think about?
While I'd love to hear some details about the Turtles famously
secret MM rules, I wonder how useful they'd be to a small-time
trader like me, without Richard Dennis giving me a stake with
which to trade. I've never traded OPM, but I suspect some different
rules apply, maybe not theoretically, but in practice.
One of the most useful passages I've read on the subject of MM
is Chapter 6 of Edward Allen Toppel's "Zen in The Markets"
entitled "Small is Big, Big is Small."
"The pain of being wrong seems to increase exponentially
in relation to the size of the position. If we normally
trade one lots and now we are trading twos, the degree
of difficulty in acting quickly when we are wrong is not
twice but perhaps five times as great... The person with
the smallest ego can take losses quickly. Also, the
smaller position usually results in a smaller loss. The
smaller the amount of pain the ego has to work through,
the less time it will take to get it out of the way."
None of this goes toward a real answer to Owen's question, but
it's something to keep in mind, whatever other rules come up.
Jim
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