How to determine the amount for trading size?

Discussions about Money Management and Risk Control.
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oem7110
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How to determine the amount for trading size?

Post by oem7110 » Thu Jul 13, 2006 11:54 pm

Does anyone know how to determine the amount of position based on following system performance?

If I based on following rule in trading option:
the leverage is 10 times, I must exit if losing 25% of my position everytime and the performance of trading system is shown below.

Does anyone have any suggestion on how to determine the percentage of total assets for each trade?

Any suggestion will be greatly appreciated.
Thank you in advance
Eric

==================================================
Performance
Profit 6526.2169 Pts
Buy & Hold Profit 5392.7803 Pts

Trade Summary
Total Trades 216

Profitable Trades
Total 91
Long 54
Short 37
Average Profit 248.0597 Pts
Highest Profit 907.3701 Pts
Lowest Profit 3.4805 Pts
Most Consecutive 5

Unprofitable Trades
Total 125
Long 58
Short 67
Average Loss -128.3777 Pts
Highest Loss -452.9404 Pts
Lowest Loss -0.4004 Pts
Most Consecutive 8

==================================================

BARLI
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Post by BARLI » Fri Jul 14, 2006 1:08 am

Profit factor looks ok, I still wouldn't dare to risk 25% of my bred

oem7110
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Post by oem7110 » Fri Jul 14, 2006 1:42 am

Exit condition will be executed if losing 25% of my current position everytime, which does not mean losing 25% of all my total asset. What I mean for money management is how to divide the total assets into many small units, and I only trade one unit for each order, if I lose 25% of this unit, then I will exit.
Does anyone have any suggestion on how to divide total assets into a number of portions based on the performance of system?
Thank for any suggestion
Eric

Paul King
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Same question, different forum, different answer

Post by Paul King » Fri Jul 14, 2006 9:20 am

Hello again Eric, I hope you get an answer you like better on this forum :-).

I think what you are looking for is something like "How about position-sizing so that you risk 1% of current capital allocated to your system based on the difference between estimated entry price and initial stop?", but I still think that the process I outlined on the Van Tharp forum is a better solution.

Paul

oem7110
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Post by oem7110 » Fri Jul 14, 2006 11:49 am

Hi Paul:
If you have any materials on hand to show your approach in step by step, could you please send one to me? It will be great help for my understanding. Your approach required many different kinds of analytical skills to do that, my ability does not up to this levels of sophistication.
I look forward to your reply
Thank everyone for suggestions
Eric

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Post by Paul King » Fri Jul 14, 2006 12:00 pm

Eric,

Helping traders develop and operate trading systems and trading business plans that fit their goals, objectives, time available, personality and tolerance for risk and reward in the context of their overall unique situation is a large part of what I do on a day-to-day basis.

As I mentioned on the other forum, this is not something that can be simply written down and executed.

I do have eBooks and Articles on my site that explain the main aspects of system development, but I haven't finished (yet) my "Complete Guide to Building a Successful Trading Business" which will cover everything I do from legal entity selection to contingency planning and operation of your systems.

I understand that c.f. has recently added simulation to TradingBlox, so why don't you plug your system in there and simulate it to find a position-sizing algorithm that suits your circumstances and objectives?

Paul

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Post by seraphim » Fri Jul 14, 2006 12:19 pm

I second Paul's suggestion of getting the Trading Blox demo version, looking at the blox already provided, modifying them to incorporate your own particular entry/exit strategy (which isn't too hard to do if you have any programming skill), and then running a few historical backtests with varying position sizes, to see the effect.

On one hand you can then easily see for yourself the effect of varying the position size. On the other hand, you'll be exposed to Trading Blox which is a very compelling tool.


Regards
Seraphim

BARLI
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Post by BARLI » Fri Jul 14, 2006 12:31 pm

I loved Monroe Trout's money management technique he explained in New Market Wizards ( I believe stock traders can also use that, since futures are leveraged its vital for future traders using it), so its simple:
1.Never lose more than 4% of your equity in one day
2.Never lose more than 10% in a month

I am biased he's got more than that, but simply put its something that works quite well, why? He explained it this way: if it's going to be the day like October 19-th 1987 was, you're nto going to lose your shirt, but get out of everything fast once you're out 4% of your equity. Of course how fast it'll be it will only depend upon the market condition.

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