You have to read and think a bit more about MM, its not an easy subject to get a handle on.Any arbitary 2% risk or this and that has nothing to do with proper MM and everything to do with your trading strategy.If you dont have a strategy, then MM is fairly useless, maybe it can slow the bleeding but thats it.
The article is quite old and I do not subscribe to most of the theories mentioned there, theories evolve as one gains in experience
Rgds
CV
The article is quite old and I do not subscribe to most of the theories mentioned there, theories evolve as one gains in experience
Rgds
CV
That "article" is poping out again! The article is part of the Traderji Hall Of Fames, but now you say you do not subscribe to many of points there. So, would you kindly put up the revised version?
I would look forward to a "Mughal-E-Azam" colored more than "Dhoom - II"
Guess I am coming in a bit late, but better late than never!
Money management and giving regard to risk are two things which traders get it wrong most of the times. The F&O segment can be extremely unforgiving if one gets it wrong in this regard. Some time back, had put this thought to words and written an article which can be found here -
http://www.elliottwaveanalyst.com/articles.php
I personally have been following the principles detailed in this article and have found that it enforces a serious discipline on the trader which will help in the long run.
Money management and giving regard to risk are two things which traders get it wrong most of the times. The F&O segment can be extremely unforgiving if one gets it wrong in this regard. Some time back, had put this thought to words and written an article which can be found here -
http://www.elliottwaveanalyst.com/articles.php
I personally have been following the principles detailed in this article and have found that it enforces a serious discipline on the trader which will help in the long run.
Hey CV,
That "article" is poping out again! The article is part of the Traderji Hall Of Fames, but now you say you do not subscribe to many of points there. So, would you kindly put up the revised version?
I would look forward to a "Mughal-E-Azam" colored more than "Dhoom - II"
That "article" is poping out again! The article is part of the Traderji Hall Of Fames, but now you say you do not subscribe to many of points there. So, would you kindly put up the revised version?
I would look forward to a "Mughal-E-Azam" colored more than "Dhoom - II"
What initially CV has posted regarding is absolutly right. I know CV will come back later and agree with his initial post.
2% per trade should be on a higher side. Preferably 1% or less is more preferable if your account supports this.
20% risk exposure experts belive is on a higher side. What I understand by this if you hold multiple lots at a given point of time, you should have these contacts in markets that have least correlation. Ex: If having some contacts in Energy, you could have few more in Technology sector.
Not exposoing above 2% of your capital should be inherent in your trading strategy. May be CV is referring to this in his reply.
"Proper Money Management is the single character that will determine weather you will enjoy the profits of your trades."
Best Regards,
HAK
PS: CV, I know you would agree to my above statements. If u are not remembering this point u could refer back to Chick
.
U
Position Sizing:=
Differs from System to System;
Mkt to Mkt;
My present Equity vis a vis my appetite or aversion to 'Risk' (which again is how far or near i am from Goal )determines my present locus standii in Risk Spectrum.Which leads to my position size.
Fund Mgrs. for long wanted a smaller size contract,becoz their 'optimal f' reqd. say 4.5 ,how can they size their positions in futures mkt ,there is either 4 or 5 contracts,now a smaller Unit satisfies that need.
Arbitarily allocating equal % of equity cant be MM.My each system requires different sizing,to get the max, even say if i use both system in same mkt,i will have to use different No of contracts.
CV'S this link to HariOm has ,helped me refer No 2 point,here.
http://traderfeed.blogspot.com/2006/12/three-pervasive-myths-of-trading.html
Differs from System to System;
Mkt to Mkt;
My present Equity vis a vis my appetite or aversion to 'Risk' (which again is how far or near i am from Goal )determines my present locus standii in Risk Spectrum.Which leads to my position size.
Fund Mgrs. for long wanted a smaller size contract,becoz their 'optimal f' reqd. say 4.5 ,how can they size their positions in futures mkt ,there is either 4 or 5 contracts,now a smaller Unit satisfies that need.
Arbitarily allocating equal % of equity cant be MM.My each system requires different sizing,to get the max, even say if i use both system in same mkt,i will have to use different No of contracts.
CV'S this link to HariOm has ,helped me refer No 2 point,here.
http://traderfeed.blogspot.com/2006/12/three-pervasive-myths-of-trading.html
Last edited by a moderator:
U
R I S K
Combining the ‘probability’ and ‘impact’ of a risk in order to define its ‘size’ is standard practice. But in most cases it’s irrational, and it certainly would not have explained to Bruce Willis and his crew ,for destroying the meteor in the film Armageddon ,why their mission made sense. To get rational measures of risk you need a causal model (‘risk map’) that links triggers, controls, events, mitigants and consequences. Once you do this measuring risk starts to make sense – and it’s much easier.
Trigger := Meteor on Collusion course;
Risk Event:= Meteor strikes Earth;
Consequences:= Loss of Life;
Now on our hand........
Control:= Blow Up meteor (by atom bomb);
Mitigant:= Build Underground Cities;
The causal, risk map approach satisfies minimalist requirements described by Chapman and Ward in
[Chapman C and Ward S, ‘Estimation and evaluation of uncertainty: a minimalist first pass approach’, International Journal of Project Management, 18, 369-383, 2000]
Where they recommend that any approach to risk quantification:
“should be so easy to use that the usual resistance to appropriate quantification based on lack of data and lack of comfort with subjective probabilities is overcome”.
Moreover, the approach ensures that:
Every aspect of risk measurement is meaningful in the context – the risk map tells a story that makes sense.
THIS IS IN STARK CONTRAST WITH THE
“risk = probability x impact” approach where not one of the concepts has a clear unambiguous interpretation.
Combining the ‘probability’ and ‘impact’ of a risk in order to define its ‘size’ is standard practice. But in most cases it’s irrational, and it certainly would not have explained to Bruce Willis and his crew ,for destroying the meteor in the film Armageddon ,why their mission made sense. To get rational measures of risk you need a causal model (‘risk map’) that links triggers, controls, events, mitigants and consequences. Once you do this measuring risk starts to make sense – and it’s much easier.
Trigger := Meteor on Collusion course;
Risk Event:= Meteor strikes Earth;
Consequences:= Loss of Life;
Now on our hand........
Control:= Blow Up meteor (by atom bomb);
Mitigant:= Build Underground Cities;
The causal, risk map approach satisfies minimalist requirements described by Chapman and Ward in
[Chapman C and Ward S, ‘Estimation and evaluation of uncertainty: a minimalist first pass approach’, International Journal of Project Management, 18, 369-383, 2000]
Where they recommend that any approach to risk quantification:
“should be so easy to use that the usual resistance to appropriate quantification based on lack of data and lack of comfort with subjective probabilities is overcome”.
Moreover, the approach ensures that:
Every aspect of risk measurement is meaningful in the context – the risk map tells a story that makes sense.
THIS IS IN STARK CONTRAST WITH THE
“risk = probability x impact” approach where not one of the concepts has a clear unambiguous interpretation.
Last edited by a moderator:
Hi Sai,
PS: CV, I know you would agree to my above statements. If u are not remembering this point u could refer back to Chick.
PS: CV, I know you would agree to my above statements. If u are not remembering this point u could refer back to Chick
.
U
Sometimes feel how foolishly i have earned & lost ,Ajay may be right about my performance ,maybe coin toss,when will i get more time than 24 hrs,am i burning fast,trading has become less stress full than earlier days,but lack of knowledge is sounding an alarm bell of Alert ,will it Peak Out.
Cant say ,have to take a break for few days.
Cant say ,have to take a break for few days.
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