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Hello Adrian,
What you are describing sounds similar to playing poker and when you
loose a hand you double your bet and if you loose again you double
you're bet again.
Obviously with enough margin, very wide stops and nerves of steel you
could ride it out.
A system like that can look good on paper but have a close look at the
Max Drawdown, add 50% to that for a real time buffer and see if you
can trade it.
A few years ago I took a 7-day free trial following a traders signals
on the Internet. He was long the S&P500 1 contract, Monday my first
day watching the S&P started going down. and by Friday he was still
holding 66 points down. It left me thinking he was selling signals
rather than actually trading himself, but maybe there are people who
can trade like that.
AP> What Van says is basically correct, but how would he comment on these situations:
AP> 1. A system that scaled in 1-3 longs and then scaled out of 1-3 longs. In other words, sometimes there would only be 1 buy signal and therefore only 1 exit signal. Sometimes though the market
AP> keeps dropping and we accumulate 3 positions and have 3 different exit points. Therefore, yes, we will have our biggest loss when holding 3 contracts. Van I assume would conclude this was a poor
AP> system.
AP> 2. Exactly as above but now lets assume we have 3 trading models:
AP> a. Buy 1 contract on a dip and exit on a rally;
AP> b. Buy 1 contract on a larger dip and exit on a rally;
AP> c. Buy 1 contract in a BIG dip and exit on a rally;
AP> So in 2 we actually have 3 trading models which can be assessed in their own right. If all were profitable and acceptable, then would trading all 3 within your overall portfolio risk parameters
AP> be considered bad in Vans opinion?
AP> Would be interested in peoples view
AP> Adrian
regards,
foolsgold
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