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Hi Bill
Still can't get through to you.
Apologies to the list.
regards
ray
R Barros
101/25 Market Street
Sydney NSW 2000
Australia
Voice: 61 2 92673470
Fax: 61 2 92673478
E-Mail: rbarros@xxxxxxxxxxxxxxxxxx
-------------------------------
Hi Bill
I have given your request much thought.
Unfortunately, try as I might, I cannot avoid
maths on this subject.
In general terms, money management seeks
to answer the following questions:
* what amount should be risked per trade
* what is max amount that should be committed
to the mkt at any one time.
* how much capital should be allocated across
opportunities.
* how many contracts to be traded
* how and when to increase the number of
contracts per trade.
In general terms, the answers are found in:
* the trader's psychological capacity to lose
* the trader's financial capacity to lose
* the edge of the trader's plan and
* the volatility of the mkt.
Specifically Money Management uses maths to supply the
answers to the last two elements. The maths I use is
basic (add, subtract etc) but does get a little complicated
in application.
Let me know if you'd like a brief description of the maths.
----------
> From: T-BONDTRADER <T-BONDTRADER@xxxxxxx>
> To: rbarros@xxxxxxxxxxxxxxxxxx
> Subject: Re: [fixed fractional vs fixed ratio]
> Date: Tuesday, August 18, 1998 7:55 PM
>
> Hi Ray
>
> I was very interested to read your post about Fixed Ratio. It is
obviously
> something that you have studied and come up with some
solutions/variations.
> I am anything but a mathematician. In other words, literate I might be,
but
> numerate I ain't!!
>
> As you know I am completing my trading manual on the T-Bonds and I
wondered
> if you have any particular 'money management' methods you might think
> appropriate. The basis of my trading is very simple: identifying
sup/res,
> retracements, etc and I have a very straightforward policy regards
trading
> at least two contracts to be able to lock in profits/break even, etc I
have
> no particular skills regarding ratios of contracts, etc.
>
> If you have any particular aspects, I would be more than pleased to
credit
> you. The manual is written for the newbie and I am not really into
highly
> complex maths. Just good honest, down to earth stuff.
>
> If you have any thoughts, I'd appreciate hearing from you.
>
> Best regards
>
> Bill
>
> -----Original Message-----
> From: ramon <rbarros@xxxxxxxxxxxxxxxxxx>
> To: RealTraders Discussion Group <realtraders@xxxxxxxxxxxxxx>
> Date: Tuesday, August 18, 1998 8:43 am
> Subject: Re: [fixed fractional vs fixed ratio]
>
>
> >Hi Mitch
> >
> >To put it as simply as I can:
> >
> >"fixed ratio determines the increase in the number of
> > contracts by reference to the rate of increase in equity
> > rather than a fixed % of equity".
> >
> >Does it work?
> >
> >Ryan takes the view the main function of money
> >management is to know when to increase the number
> >of contracts. He believes that Fixed Ratio is the best
> >solution to the problem. His assumes that what is
> >important is the $ in a account irrespective of how
> >the profits are achieved.
> >
> >The opposing view holds that a mathematical formula
> >ignoring the variables of an approach or system
> >will not be effective in maximising profits.
> >
> >For me, it depends on your method. If you are
> >using a system where all setups have about
> >the same probability of success, then Ryan's assumptions
> >will be valid and FR will "work".
> >
> >e.g. your system has 3 setups all of which have about
> >a 55% probability of success.
> >
> >On the other hand where the assumptions break down is
> >where your setups have widely different probabilities.
> >
> >e.g. one has a 33% and another 67%.
> >
> >In this situation Fixed Ratio must be treated with care.
> >
> >Say you have had a series of profitable trades where
> >you have used the 67% setup. At this point FR may have raised
> >the number of contracts to 5.
> >
> >Your next few trades may be the 33% probability which by
> >definition have a lower chance of success. You're placing
> >the maximum number of contracts at a time when you have
> >the least chance of success.
> >
> >In the above situation, it'd be best to treat FR as setting the
> >max number of contracts and then adjusting for the setup's
> >probability of success.
> >
> >Viewed in this light, FR does work irrespective of the nature
> >of your method or system.
> >
> >regards
> >
> >ray
> >
> >R Barros
> >101/25 Market Street
> >Sydney NSW 2000
> >Australia
> >
> >Voice: 61 2 92673470
> >Fax: 61 2 92673478
> >E-Mail: rbarros@xxxxxxxxxxxxxxxxxx
> >
> >
> >
R Barros
101/25 Market Street
Sydney NSW 2000
Australia
Voice: 61 2 92673470
Fax: 61 2 92673478
E-Mail: rbarros@xxxxxxxxxxxxxxxxxx
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