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Hi Tom
-----Original Message-----
From: Thomas Pfluegl <thomas.pfluegl@xxxxxxxxxxxxxxxxx>
Subject: Money Management questions
>Hello Traders,
>
>I found the following interesting questions at the Turtletraders web-site
>(http://www.turtletrader.com/tool1.html).
>I don't care about the Turtle system, I just want to open a discussion on
>these issues. Feel free to pick out the most interesting ones.
>
>Q1) How much capital do you place on each trade? Is this precise?
Capital per trade is for me a function of my plan's edge,
the mkt's volatility, and the corrlelation between
the mkts I trade. I use Gallacher's formula to
determine this.
>
>Q2) When should you take a loss to avoid larger losses?
This is a function of my trading plan.
The first element is my initial stop, placed where if hit
I am wrong about the trade. Then the second step is, once
I ahve a position, the mkt must act in accordance with the
scenario for my trade - or - as the Phantom of the Pits puts in,
the trade must prove that it is a winner.
>Q3) If you begin a losing streak do you trade the same? What formula do you
use?
I start to reduce numbers once a predetermined level is hit.
Again this is function of statistical data based on my trading
history and the current volatility of the mkt.
>Q4) How should you prepare if trading both long and short positions?
I'm not sure what this means. Do you mean holding back to back? If
so, I don't engage in this practice. For me a long and short of the
same position is the same as no position.
If you mean when do I stop and reverse? Again this is a function of my plan.
If you mean some sort of spread strategy - I don't trade spreads.
>Q5) Is trading affected by commodities that move at different times?
I trade only FX but keep an eye on Gold, Interest Rates and the Stock Mkt
- using InterMkt analysis to provide an overview of the longer term trends.
>Q6) How is correlation handled in practical trading sense?
This is a function of the capital allocation formula I use.
>Q7) Should you have profit targets? Yes or No?
I use the "rule of three" with profit objectives for the first
2 thirds. The last third looks to capture unexpected trends and
is usually taken out by a trailing stop.
>Q8) Does a portfolio of long and short allow one to trade more positions?
As above - I don't understand "portfolio of long and short..."
>Q9) How is your trading adjusted with accumulated new profits?
Once I have made 30%, I add 15% to my capital base and apply the
same strategy each 15% therafter. Each finaicial year begins afresh.
>Q10) How are stops handled when volatility is a concern?
My stops are a function of the mkt's structure and volatility. If the
volatility becomes unacceptable, then I take a trading holiday.
>Q11) Is there a method to limit entry risk with options?
I don't use options.
>Q12) How does one prepare for unforseen large scale trends?
This is a function of last last third of my contracts.
regards
ray
R Barros
101/25 Market Sydney
NSW 2000
Australia
Voice: 612 92673470
Fax: 612 92673478
E-mail: ramon@xxxxxxxxx
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