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Obviously my friend you completely miss the point.
Money management has to be applied to the account equity not to the system
or portfolio of systems (which is what most people tell you). Your account
does not care a damn how it grew to its current level just that it got there
"somehow".
I suggest you now reach for the delete key as you have listened long enough!
-----Original Message-----
From: jeffroy@xxxxxxxxx <jeffroy@xxxxxxxxx>
To: UKTrading@xxxxxxxxxxxxx <UKTrading@xxxxxxxxxxxxx>
Date: 16 August 1998 12:44
Subject: Re: SMARTTRADING...YEA RIGHT
>I have listened to this long enough. If you place any faith at all in
>mathematics and/or statistics you realize that trades, like many other
>things in human behavior, are not serially correlated. The idea of an
>outside idea taking nothing more than a trade-by-trade listing and teling
>you when to trade more contracts based only on the trade-by-trade listing
is
>ABSURD. The assumption you are making if you buy into all of that is that
>trades from any system, good or bad, real or imaginary, can be (without
>knowing ANYTHING about the methodology) thrown into this magical money
>management scheme and "POOF" you have a great system.......Think about it.
>
>-----Original Message-----
>From: Simon Townshend <UKTrading@xxxxxxxxxxxxx>
>To: RealTraders Discussion Group <realtraders@xxxxxxxxxxxxxx>
>Date: Sunday, August 16, 1998 6:32 AM
>Subject: Re: SMARTTRADING...YEA RIGHT
>
>
>>No!
>>
>>I work for myself. Actually, although it is rather off the subject, I use
>>the 80/20 principle extensively when developing business strategies for
>>major European corporations. It happens to apply equally to trading.
>>
>>Simon
>>
>>-----Original Message-----
>>From: David Andrews <david_s_andrews@xxxxxxxxxxx>
>>To: UKTrading@xxxxxxxxxxxxx <UKTrading@xxxxxxxxxxxxx>
>>Date: 15 August 1998 20:17
>>Subject: Re: SMARTTRADING...YEA RIGHT
>>
>>
>>>
>>>Do you work with Larry Williams?
>>>
>>>
>>>>>From owner-realtraders@xxxxxxxxxxxxxx Sat Aug 15 01:20:01 1998
>>>>Received: from localhost (localhost [127.0.0.1])
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>>>> Sat, 15 Aug 1998 01:18:00 -0700 (PDT)
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>>>> by accessone.com (8.8.5/8.8.5/PIH) with ESMTP id BAA21042
>>>> for <RealTraders@xxxxxxxxxxxxxx>; Sat, 15 Aug 1998 01:09:51 -0700
>>>(PDT)
>>>>Received: from rock-mentor - 193.149.75.167 by email.msn.com with
>>>Microsoft SMTPSVC;
>>>> Sat, 15 Aug 1998 01:09:29 -0700
>>>>Message-Id: <006301bdc823$bdb97360$a74b95c1@xxxxxxxxxxx>
>>>>Date: Sat, 15 Aug 1998 09:06:39 +0100
>>>>Reply-To: UKTrading@xxxxxxxxxxxxx
>>>>Sender: owner-realtraders@xxxxxxxxxxxxxx
>>>>From: "Simon Townshend" <UKTrading@xxxxxxxxxxxxx>
>>>>To: RealTraders Discussion Group <realtraders@xxxxxxxxxxxxxx>
>>>>Subject: Re: SMARTTRADING...YEA RIGHT
>>>>X-To: "RealTraders" <RealTraders@xxxxxxxxxxxxxx>
>>>>X-Priority: 3
>>>>X-MSMail-Priority: Normal
>>>>X-Mailer: Microsoft Outlook Express 4.72.3110.1
>>>>X-MimeOLE: Produced By Microsoft MimeOLE V4.72.3110.3
>>>>X-Listprocessor-Version: 8.1 -- ListProcessor(tm) by CREN
>>>>
>>>>There is some interesting discussion going on here about money
>>>management.
>>>>As someone who knows Ryan Jones (who is Rumery & Lehman) I thought you
>>>might
>>>>like some answers and a slightly different insight:
>>>>
>>>>Firstly do you need to spend $1500 on the software? Well that depends
>>>on
>>>>how you value your time. If quite some hours of your time developing a
>>>>similar application is worth more to you than that, then consider
>>>buying it.
>>>>If you have more time on your hands and less money build your own. It
>>>is
>>>>relatively straightforward just using Excel and a bit of Visual Basic -
>>>if
>>>>you have the time! All of the principles and equations can be obtained
>>>from
>>>>Ryan's video from Futures West which I think costs about $70 or
>>>something.
>>>>That is all you need to build your own.
>>>>
>>>>Secondly, and perhaps the most important aspect of fixed ratio is this:
>>>It
>>>>will NOT make a losing system make money. It may or may not make an
>>>average
>>>>system better (over the long term yes it will, short term is just down
>>>to
>>>>luck). A decent system or methodology it will set on fire!!!!
>>>>
>>>>Thirdly, to implement the correct fixed ratio to your trading you must
>>>>tailor the parameters to suit your system. If you have a very high %
>>>of
>>>>winners making small amounts you would select the numbers of contracts
>>>>differently to a system that makes huge amounts on a very low % of
>>>winners.
>>>>That is down to understanding the CONCEPT inside out and not just the
>>>>mathematics. Actually in a similar vein you should be wary of slippage
>>>and
>>>>commissions and make generous allowances when doing your analysis. If
>>>your
>>>>system is only making $100 per trade on average after S&C and you are
>>>not
>>>>getting the figures spot on you will spend your life oscillating back
>>>and
>>>>forth between 1 and 2 contracts.
>>>>
>>>>Overall I consider Fixed Ratio to be a good simple concept that has
>>>been
>>>>expanded and embellished so as to command the high prices that we all
>>>see.
>>>>However consider this. 90% of your earnings potentially come from
>>>selecting
>>>>the number of contracts to put on each trade and not selecting the
>>>trade
>>>>itself. Yet the really hard bit, in my experience, is selecting the
>>>damn
>>>>trade to start with!! This is a classic example of Pareto's 80/20 Law:
>>>20%
>>>>of the effort generates 80% of the rewards, whilst 80% of the effort
>>>>generates only 20% of the rewards. That really is spot on it this
>>>case.
>>>>
>>>>You might deduce from this that I am in favour of Ryan Jones and his
>>>Fixed
>>>>Ratio techniques. Well yes I am now. The operative word in that last
>>>>sentence is NOW. Until you have a system / methodology that produces
>>>decent
>>>>and consistent profits you do not even need to worry about all of this.
>>>>Carry on working to get to the point where your 1 lot is bring you in a
>>>>regular weekly wage. Then and only then does all of this become
>>>relevant
>>>>and by that stage you will not worry too much about paying premium
>>>prices.
>>>>
>>>>In case you were wondering, I have been in touch with Ryan Jones for
>>>some
>>>>time now. I am paying him rather a lot of money for him to work with
>>>me and
>>>>yes it is worth it as I can already see the Pareto principle at work in
>>>>practice rather than just theory.
>>>>
>>>>Hope that adds something to the debate!
>>>>
>>>>Happy trading
>>>>
>>>>Simon
>>>>
>>>>
>>>>
>>>>
>>>
>>>
>>>______________________________________________________
>>>Get Your Private, Free Email at http://www.hotmail.com
>>
>>
>>
>>
>>
>>
>
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