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>* What approaches to money management have you had a positive experience
>with?
My experiences are based mostly on monte carlo simulations. I like
a "percent risked" (adjust the size so that the total amount risked
- or stoploss - for each trade is a fixed fraction of your equity
- this isn't the same as fixed fraction where the trade size is a
fraction of total equity). I can eke out a bit more performance by
combining it with "percent volatility" (adjust the size os that a
measure of volatility expressed in dollars is a fixed fraction of
your equity).
>* What approaches to money management have you had a negative experience
>with?
Fixed ratio, IMO a stupid idea marketed by Ryan Jones. It fails to
account for capitalization, it fails to account for trade risk or
market volatility, it fails to manage risk and drawdown, it fails to
preserve capital. It reacts purely to net profit without regard to
anything else. A small account can trade itself into nearly 100%
drawdown with this technique; an impossibility for other position
sizing methods that can tell you to trade zero contracts at times,
and yield far more profit for less risk.
>* What importance to you place on money management?
Once you have a positive expectancy trading method, money management
is what magnifies your profits.
>* Which do you prefer - simple or complex money management strategies?
Simple is harder to mess up. Developing a simple strategy can be a
complex process -- in my case involving Monte Carlo simulations.
>* Which is more effective - simple or complex money management strategies?
My own attempts at devising complex strategies didn't turn out
measurably better than the simple ones.
>I'm thinking here mostly of managing the size of short-term trades
>on a single strategy on a single symbol rather than the more
>complicated notion of portfolio management. However, all thoughts
>will be gratefully received.
You might be interested in
http://unicorn.us.com/trading/prosizer.html - an Excel tool
designed for deriving an effective money management strategy for a
single-contract trading system.
-Alex
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