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Vince.
You are right and there is another important aspect: diversification.
You might want to go back to Mr. Dr. Tharp and let him know that this
part of his interview here
(http://www.iitm.com/consulting/vkt_interview.htm) is NOT correct:
"Incidentally, the most important part of the equation is the money
management overlay that I've already talked about. Yet, if you bought a
software package to develop a trading system, you could not apply any of
these money management overlays. Isn't that interesting? All of the
software packages give people what they want and thus focus on the least
important areas of system development-how to use various indicators for
entry."
We have launched Wealth-Lab Developer 2 now nearly two years ago and it
actually is focusing on this aspect (besides all the other simple
stuff).
I wish all this book writers would update themselves from time to time.
Vince, I bet that even now that I tell you, I will not receive any email
form Mr. Tharp and I bet that the quote will still be there in a month!
Like to hear from you.
Volker
(Wealth-Lab Inc.)
||-----Ursprüngliche Nachricht-----
||Von: Vince Heiker [mailto:tachyonv@xxxxxxxxxxx]
||Gesendet: Thursday, November 06, 2003 10:20 PM
||An: omega-list@xxxxxxxxxx
||Betreff: Risk and Money Management Guides
||
||Perhaps 25% of successful trading is risk and money management. Maybe
5%
||to
||10% are our trading strategies, methods, tactics, technical analysis,
||cycles
||analysis, fundamental analysis, crowd psychology, intermarket
analysis.
||The
||rest is personal psychology and self discipline.
||
||Strangely, we spend most of our efforts on the 5% to 10%.
||
||How can a trader learn more about risk and money management?
||
||Recommend viewing many many times, the Position Sizing video set by
Dr.
||Van
||Tharp available at his www.iitm.com website. His two books are also
ok,
||but
||this video set is outstanding, whether swing trading, intraday trading
or
||investing.
||
||Dr. Tharp's books are:
||
||- Financial Freedom Through Electronic Day-Trading
||- Trade Your Way to Financial Freedom
||
||Also worth reading are these books - some only have a chapter or so
about
||money and risk management:
||
||- New Thinking in Technical Analysis by Rick Bensignor
||- The Compleat Guide to Day Trading Stocks by Jake Bernstein
||- The Trading Game: Playing by the Numbers to Make Millions, by Ryan
Jones
||- The Real Holy Grail: Money Management by Eddie Kwong
||- Elements of Successful Trading by Robert Rotella
||- Campaign Trading by John Sweeney
||- Undergroundtrader.com Guide to Electronic Trading by Jea Yu
||
||If you want deeper books, these are more difficult reading and contain
||more
||about risk and money management:
||
||- Quantitative Trading and Money Management by Fred Gehm
||- Portfolio Management Formulas by Ralph Vince
||- Mathematics of Money Management by Ralph Vince
||- New Money Management by Ralph Vince
||- Profit Strategies: Unlocking Trading Performance with Money
Management
||by
||David Stendahl
||
||There are conflicting opinions about risk and money management methods
and
||details, and these topics have been a battleground for some academics.
||
||There are no easy, simple or single answers to most questions about
risk
||and
||money management. Beware of anyone giving you simple or definitive
||answers,
||especially without his/her knowing a lot about you and your trading.
||
||That said, and tongue in cheek, the simplest and most accurate answer
to
||what to use for stop losses, trailing stops, position sizing, profit
||targets, scaling in/out or not, is: "it depends".
||
||It depends - upon your trading strategies, risk tolerance, account
size,
||personal psychology, even at times the markets and the nature of the
||symbols
||that you trade. There are differences between instruments - trading
shares
||versus trading contracts. Etc.
||
||Like finding your own trading strategies and methods, same kind of
effort
||is
||required for developing your own risk and money management rules.
||
||Vince Heiker
||Flower Mound, Texas
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