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Hello Erik,
EMA> Hi everyone
EMA> Being now a3 years activ user of TS2000i and having read alot about "money
EMA> management" (Van Tharp, Jones, Vince ...) i would like to know which best
EMA> software i could buy (Rina, Athena, Palisade, Performance I ..) with
EMA> position sizing/position risk management/portfolio management
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http://www.tssupport.com/articles/art1.html
The ideology of money management programs
The ideology a program is based on has the greatest role in the functioning of the trading system.
In most cases using money management makes a system more robust and profitable – at least theoretically.
A lot of articles and forum postings have been devoted to this subject.
I’d like to review the realization of money management implemented in programs used in wide practice.
Such products presently available include Money Manager 2000i, Know
money management, Performance I, Athena, Palisade.
Of those I’ve carefully studied the Money Manager 2000i by
RinaSystems, inc. Here I will review software money management methods on that example.
As far as I know all modern money management programs employ the same basic principle: they apply
money management techniques to saved reports, that is, to a sequence of trades that have already taken place.
This is the source of all the problems and discrepancies. Trying to apply money management to already closed
trades is ideologically wrong.
Technical analysis and money management are intertwined so that they cannot be used separately. If you have a
trading system, that is, a set of rules basing on which you enter and exit the market, then the only correct way
to use money management is to use it simultaneously with your system rules.
Here is an example. Suppose we are using a moving average system with a StopLoss as a function of ProSuite 2000i.
The system goes long during a downtrend, and as stop losses are activated a series of numerous losing trades occurs.
Let’s remove the StopLoss from ProSuite 2000i and use the system. Saving the report, let’s load it in Money Manager 2000i
and use >Scaling>Money Management Stop. Logically, the results must be the same, but this is not the case. Money Management
and use > 2000i exits at the first stop loss. Then it enters again with the first sell signal. This does not account for the'
and use > series of losses caused by those tight stops – which is reasonable, as Money Manager 2000i cannot “make up” the
and use > signals that are not present in the saved report.
Then this is no longer surprising that using this technique somewhat improves all parameters. The percent of
losing trades is decreased, because Money Manager simply does not take half of them into account.
One can find many more such examples, but the implication is always one – the money management most of us use
(that is, money management applied to saved reports) is not working correctly. And this will not change until
a different approach to money management will be used in software.
Yours Mark Freeman
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