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Great discussion....all good stuff.
I have an issue regarding system "adjustments" for larger risks......larger
number of contracts..
1) Shouldn't any "stop loss" signals be adjusted according to the risk
outstanding in the current position ?
This seems imperative if a dollar-loss is being used. However, the case
could be made for a percentage stop-loss as well......I would want a tighter
% stop if the # of contracts is higher than normal. Otherwise a 1-contract
3% loss of $5,000 would end up to be a $50,000 loss for 10 contracts !!!
2) Should the number of contracts be increased "incrementally" after the
initial signal as long as the PositionProfit in within the right parameters
? Or should the entire increase occur on the next trade ?
> -----Original Message-----
> From: Cab Vinton [mailto:cvinton@xxxxxxxxxxx]
> Sent: Friday, February 04, 2000 10:12 AM
> To: L_Omega
> Subject: RE: Re[7]: Rocket Science
>
>
>
> > My best guess is that ploughing ALL your profits
> > back in to a bigger position (and hence increasing
> > your leverage) is bad money-management
> > and will lead you to have much higher odds of going
> > bust than an approach where you increase your risk
> > in proportion with your overall account value.
>
> Don't forget that there's always the option of betting aggressively with
> accumulated profits & conservatively from your initial capital,
> e.g., total
> risk = 1% of initial capital + Optimal F% of profits. Granted, this will
> lead to very high drawdown statistics, but at least the drawdowns will be
> coming from the market's money, & the potential payoff may well be
> worthwhile.
>
> Cheers,
>
> Cab Vinton
>
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