dilemma between money management principle and probability of this game

rajneesh_mailbox · #1 22nd June 2007, 06:18 PM

dear friends ,
i am initiating this thread to discuss the conflict of money managment principle and the probability of your trade risk . i have chosen this f & o segment because here certainly being a small account <10L means a tighter money managment control. though i do'nt advise trading in f&o but to hedge yurself against any adverse move this is the only shelter. now comes crucial point being a leveraged game u have to plce a tighter stoploss to avoid large loss. but it also makes u prone to whipsaw. many strategy like breakout chase do'nt work because of high risk.
any idea from seasoned player how to balance this.
rajneesh

loosingstreak · #2 22nd June 2007, 06:44 PM

Hi,
Your question is ambigious. There are ways to reduce risk but these would also reduce reward. If you could be more specific, maybe someone could help.

rajneesh_mailbox · #3 23rd June 2007, 10:14 AM

hi,
i am not a day trader.i do trading based on day pattern . since day pattern most of times have 5-10% stop loss point from cash price.Since most of the future lot comes to the size of 3-4 L. typical stop loss cost around 15 to 30k.which violates money management. if i follow support resistance trading strategy that only gives me good entry price other breakout strategy or any confirmation strategy generally requires larger stop loss point though these do have higher probability.looking volatility and pro attack for fishing catch us at wrong side if i place a hard stop.mental stop are too late. option liquidity is too low to deal in that though volatility is far less but u do'nt have exit option in the optins most of time at the time of crisis.
now my point is that from a non day trader perspective and a account size of about 10L am i entitled for future business. i'll definitely hedge my self against any potential major sell off .
rajneesh

uasish · #4 23rd June 2007, 10:27 AM

Until Entry is more sharpened & Stop ,exactly defined with max drawdown visualized,it is a more Risky proposition in 'F & O'.For hedgeing purpose plain vanilla Index Option (no of contarcts are to be calculated as per one's portfolio) is best,& anybody can do it.

loosingstreak · #5 23rd June 2007, 05:29 PM

Quote:

Originally Posted by rajneesh_mailbox

hi,
i am not a day trader.i do trading based on day pattern . since day pattern most of times have 5-10% stop loss point from cash price.Since most of the future lot comes to the size of 3-4 L. typical stop loss cost around 15 to 30k.which violates money management. if i follow support resistance trading strategy that only gives me good entry price other breakout strategy or any confirmation strategy generally requires larger stop loss point though these do have higher probability.looking volatility and pro attack for fishing catch us at wrong side if i place a hard stop.mental stop are too late. option liquidity is too low to deal in that though volatility is far less but u do'nt have exit option in the optins most of time at the time of crisis.
now my point is that from a non day trader perspective and a account size of about 10L am i entitled for future business. i'll definitely hedge my self against any potential major sell off .
rajneesh

I think the first step would be not to trade illiquid counters.

Secondly if you find the stop too large for your account size go for spreads or avoid such a trade.

I ve known people who trade with less than your account size successfully.

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