|
PureBytes Links
Trading Reference Links
|
<x-html><!doctype html public "-//w3c//dtd html 4.0 transitional//en">
<html>
Money management is only one part of any business. Like any other<b><font size=+1>
business </font></b>you have to know what you are doing to be successful.
Would you consider any other store front business a coin toss? I
don't know today's number, but it used to be only 1 in 10 new business
starts was successful. That is why there are so many employees and
so few successful entrepreneurs. Having a business and working for
wages, sometimes are one in the same. People go to school for years
to learn how to be doctors, engineers, etc. They go to graduate business
schools to understand how to operate a successful business. Why do
people figure that if they can put $20,000 into a trading account they
can get rich and never work again? The education in this business
is just as important as in any other, and very few realize that you will
pay for that education in one way or another. When I was trading
on the floor a new market maker would ask, how long before I can become
successful? At that time, the 70s, I said somewhere between $8000 and $12,000.
Today, with the increased volatility, it could be much much higher.
Good luck with your understanding. Ira.
<p>Thomas Pfluegl wrote:
<blockquote TYPE=CITE>Hi list,
<p>Concerning Money Management ideas, almost every publication about (Futures)
<br>Trading Systems, etc. mentions that it is important to risk only a
small
<br>percentage (max. 2%, better <=1%) on each trade.
<p>I did a small test with Excel (coin toss, which is a 50/50 system),
to
<br>reveal how many Consecutive Losses are 'necessary' to suffer a 50%
drawdown
<br>(which is a close-down benchmark for most of the funds around).
<br>The attached chart (RunsDrawdown.jpg) shows that when risking 0.25%
it
<br>takes 278 consecutive runs, when risking 2.0%, 36 runs, and with 5.0%
only
<br>15 runs to throw the towel. The minimized columns illustrate what big
<br>difference it makes varying risk only by a small percentage .
<p>A simulated coin toss expectation game (which ran almost a week) showed,
<br>that one must expect up to 20 (probability: 1 : 1.048.576 or 0.000095%)
<br>consecutive profits/losses in a 50/50 system!
<p>Comments anyone?
<p>Thanks,
<br>Thomas Pfluegl
<p> ------------------------------------------------------------------------
<br>
Name: RunsDrawdown.jpg
<br> RunsDrawdown.jpg Type: JPEG Image (image/jpeg)
<br>
Encoding: base64
<p> ------------------------------------------------------------------------
<br>----------------------------------------------------------------------------
<br>Thomas Pfluegl, Rudersdorf 8, A - 4212 Neumarkt
<br>Austria
Tel. ++ 43 - (0) 7941 - 8106
<br>http://keplerweb.oeh.uni-linz.ac.at/trading/index.html
<br>----------------------------------------------------------------------------
<br>Austria/Europe --> high mountains --> Mozart --> no kangaroos
<br>----------------------------------------------------------------------------</blockquote>
</html>
</x-html>From ???@??? Thu Apr 13 11:50:03 2000
Return-Path: <listmanager@xxxxxxxxxxxxxxx>
Received: from waltt1.thetrellis.net ([208.179.56.11])
by purebytes.com (8.9.3/8.9.3) with SMTP id LAA03065
for <neal@xxxxxxxxxxxxx>; Thu, 13 Apr 2000 11:46:49 -0700
Received: from REALTRADERS.COM
([208.179.56.198])
by waltt1.thetrellis.net; Thu, 13 Apr 2000 11:46:19 -0700
Received: from mailhost.ap.net by realtraders.com
with SMTP (MDaemon.v3.0.0.R)
for <realtraders@xxxxxxxxxxxxxxx>; Thu, 13 Apr 2000 11:37:34 -0700
Received: from ap.net (D-28.Arch-03.ap.net [207.44.219.221])
by mailhost.ap.net (8.9.3/8.9.3) with ESMTP id LAA11688;
Thu, 13 Apr 2000 11:41:47 -0700 (PDT)
Message-ID: <38F614E2.AC76681D@xxxxxx>
Date: Thu, 13 Apr 2000 11:41:38 -0700
From: Ira Tunik <ist@xxxxxx>
X-Sender: "Ira Tunik" <ist@xxxxxxxxxxx> (Unverified)
X-Mailer: Mozilla 4.7 [en]C-CCK-MCD (AccessPort) (Win98; U)
X-Accept-Language: en
MIME-Version: 1.0
To: <realtraders@xxxxxxxxxxxxxxx>
CC: realtraders@xxxxxxxxxxxxxxx
Subject: [RT] Re: Money Management: Consecutive Losses
References: <4.1.20000413172951.0456f6a0@xxxxxxxxxxxxxxxxxx>
Content-Type: multipart/alternative;
boundary="------------3832464DEA4F0D19A784754E"
X-MDaemon-Deliver-To: realtraders@xxxxxxxxxxxxxxx
X-Return-Path: ist@xxxxxx
X-MDRcpt-To: realtraders@xxxxxxxxxxxxxxx
Sender: listmanager@xxxxxxxxxxxxxxx
Precedence: bulk
X-MDMailing-List: realtraders@xxxxxxxxxxxxxxx
X-MDSend-Notifications-To: listmanager@xxxxxxxxxxxxxxx
Reply-To: ist@xxxxxx
Status:
<x-html><!doctype html public "-//w3c//dtd html 4.0 transitional//en">
<html>
Money management is only one part of any business. Like any other<b><font size=+1>
business </font></b>you have to know what you are doing to be successful.
Would you consider any other store front business a coin toss? I
don't know today's number, but it used to be only 1 in 10 new business
starts was successful. That is why there are so many employees and
so few successful entrepreneurs. Having a business and working for
wages, sometimes are one in the same. People go to school for years
to learn how to be doctors, engineers, etc. They go to graduate business
schools to understand how to operate a successful business. Why do
people figure that if they can put $20,000 into a trading account they
can get rich and never work again? The education in this business
is just as important as in any other, and very few realize that you will
pay for that education in one way or another. When I was trading
on the floor a new market maker would ask, how long before I can become
successful? At that time, the 70s, I said somewhere between $8000 and $12,000.
Some never where and blew out in a hurry. Like any other business
the percentage of successes is very low. Today, with the increased
volatility, the cost of an education could be much much higher.
Good luck with your understanding. Ira.
<p>Thomas Pfluegl wrote:
<blockquote TYPE=CITE>Hi list,
<p>Concerning Money Management ideas, almost every publication about (Futures)
<br>Trading Systems, etc. mentions that it is important to risk only a
small
<br>percentage (max. 2%, better <=1%) on each trade.
<p>I did a small test with Excel (coin toss, which is a 50/50 system),
to
<br>reveal how many Consecutive Losses are 'necessary' to suffer a 50%
drawdown
<br>(which is a close-down benchmark for most of the funds around).
<br>The attached chart (RunsDrawdown.jpg) shows that when risking 0.25%
it
<br>takes 278 consecutive runs, when risking 2.0%, 36 runs, and with 5.0%
only
<br>15 runs to throw the towel. The minimized columns illustrate what big
<br>difference it makes varying risk only by a small percentage .
<p>A simulated coin toss expectation game (which ran almost a week) showed,
<br>that one must expect up to 20 (probability: 1 : 1.048.576 or 0.000095%)
<br>consecutive profits/losses in a 50/50 system!
<p>Comments anyone?
<p>Thanks,
<br>Thomas Pfluegl
<p> ------------------------------------------------------------------------
<br>
Name: RunsDrawdown.jpg
<br> RunsDrawdown.jpg Type: JPEG Image (image/jpeg)
<br>
Encoding: base64
<p> ------------------------------------------------------------------------
<br>----------------------------------------------------------------------------
<br>Thomas Pfluegl, Rudersdorf 8, A - 4212 Neumarkt
<br>Austria
Tel. ++ 43 - (0) 7941 - 8106
<br>http://keplerweb.oeh.uni-linz.ac.at/trading/index.html
<br>----------------------------------------------------------------------------
<br>Austria/Europe --> high mountains --> Mozart --> no kangaroos
<br>----------------------------------------------------------------------------</blockquote>
</html>
</x-html>From ???@??? Thu Apr 13 12:14:28 2000
Return-Path: <listmanager@xxxxxxxxxxxxxxx>
Received: from waltt1.thetrellis.net ([208.179.56.11])
by purebytes.com (8.9.3/8.9.3) with SMTP id LAA03662
for <neal@xxxxxxxxxxxxx>; Thu, 13 Apr 2000 11:56:14 -0700
Received: from REALTRADERS.COM
([208.179.56.198])
by waltt1.thetrellis.net; Thu, 13 Apr 2000 11:57:11 -0700
Received: from mailhost.ap.net by realtraders.com
with SMTP (MDaemon.v3.0.0.R)
for <realtraders@xxxxxxxxxxxxxxx>; Thu, 13 Apr 2000 11:48:24 -0700
Received: from ap.net (D-28.Arch-03.ap.net [207.44.219.221])
by mailhost.ap.net (8.9.3/8.9.3) with ESMTP id LAA12689;
Thu, 13 Apr 2000 11:52:40 -0700 (PDT)
Message-ID: <38F6176F.69DAD6DC@xxxxxx>
Date: Thu, 13 Apr 2000 11:52:31 -0700
From: Ira Tunik <ist@xxxxxx>
X-Sender: "Ira Tunik" <ist@xxxxxxxxxxx> (Unverified)
X-Mailer: Mozilla 4.7 [en]C-CCK-MCD (AccessPort) (Win98; U)
X-Accept-Language: en
MIME-Version: 1.0
To: <realtraders@xxxxxxxxxxxxxxx>
CC: realtraders@xxxxxxxxxxxxxxx
Subject: [RT] Re: OPT - averaging down on MSFT leaps
References: <3a.3bb6384.26275f81@xxxxxxx>
Content-Type: text/plain; charset=us-ascii
Content-Transfer-Encoding: 7bit
X-MDaemon-Deliver-To: realtraders@xxxxxxxxxxxxxxx
X-Return-Path: ist@xxxxxx
X-MDRcpt-To: realtraders@xxxxxxxxxxxxxxx
Sender: listmanager@xxxxxxxxxxxxxxx
Precedence: bulk
X-MDMailing-List: realtraders@xxxxxxxxxxxxxxx
X-MDSend-Notifications-To: listmanager@xxxxxxxxxxxxxxx
Reply-To: ist@xxxxxx
Status:
Scale trading makes one very bad assumption. That what goes down must at one
time go back up. That isn't always the case. And if it goes up, it might not go
up far enough to bail you out. I am personally familiar with one party who scale
traded into 250,000 shares of stock and is still down over $1,000,000.
There are many systems that allow for trades that are already established and
project profitable targets. I have one, as do others. Scale traders are those
that are trying to pick bottoms or tops. I have found that in the long run that
doesn't work that well. It is always satisfying to pick a bottom or top, but in
over 30 years I don't know of anyone that has done it successfully for any
extended period of time. There was a famous trader/investor that once said. I
will give someone else the bottom 10% and the top 10%, give me the 80% in the
middle. I adopted that attitude many years ago. Have a good week end. Ira.
Scaletrade@xxxxxxx wrote:
> In a message dated 04/12/2000 9:35:56 PM Pacific Daylight Time, ist@xxxxxx
> writes:
>
> > Old adage. Never add to a losing trade.
>
> Ira
>
> I respect your work a lot, but I'd like to say that adding to a losing trade
> is what makes scaletrading work. When done with proper choice of commodities
> (which will never go to zero), and done carefully within the framework of an
> adequate (yes, there's a rub!) capital base, and done with patience, it can
> eventually be quite profitable. Take recent examples of cotton, orange
> juice, and sugar. If I could pick a bottom, I could position trade. Since I
> can't, I scaletrade. All that said, there are still many pitfalls.
>
> Larry
|