Money management suggestions for short term system

Discussions about Money Management and Risk Control.
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BARLI
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Money management suggestions for short term system

Post by BARLI » Wed Mar 23, 2011 3:36 pm

Guys, my system trades short term (intraday and max of 2 days).. It's 60% winning trades.. what good money management would you suggest using?

It's EUR-USD pair 1 hour.. Avg profit is less than avg loss but it wins more frequently than it loses..
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sluggo
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Post by sluggo » Wed Mar 23, 2011 4:41 pm

I would suggest you use the one whose backtest results please you the most.

You might consider testing
  1. size = (Param * Equity) / (distance_to_stop * BigPointValue)
  2. size = (Param * Equity) / (constant * ATR * BigPointValue)
  3. size = (Param * Equity) / (constant * StdDev * BigPointValue)
  4. Drawdown Reduction Threshold (WOTT p.258)
  5. Fixed Ratio (link1)
  6. Timid Equity + Bold Equity sizing idea (link2)
  7. Various stunts and contrivances from Van Tharp's Definitive Guide To Position Sizing
Item number 1. in the list above is sometimes called "Fixed Fractional" and/or "Percent Risk" position sizing. Items number 2. and 3. are sometimes called "Percent Volatility" position sizing.

Some of these are more difficult to backtest than others. Depending on the sophistication of your backtest simulator, you may not be able to take advantage of all of them.

BARLI
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Post by BARLI » Thu Mar 24, 2011 1:18 am

sluggo, thanks so much.. Definitely will have to look at all of those.. Sorry I didn't attach the backtest report.. (now added, above) What do you think I can do about it.. it's really raw as of right now.. no stops/limit orders..

viewtopic.php?p=19228&highlight=management#19228

Sluggo, whats your favorite MM technique for high frequency trading?

Chris67
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Post by Chris67 » Fri Mar 25, 2011 2:36 am

The best system of managing money for a short term system (in my experience only - which says it all - probably? - about my ability to design a short term system) is to take your money and heap in on an open fire place.
That way you get exactly the same resuly over the long run - but without any of the immense workload during that period :D

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Post by rabidric » Fri Mar 25, 2011 5:19 am

lol chris you beat me to it!

though i was going to say:
stick to 1 lots for as long as you can bear, then rapidly "advance" your size to zero.

ok, ok , sorry BARLI, couldn't resist, though i know you know to expect that kind of cynicism here!

more constructively though, i can say that any fixed fractional type of method, or one that changes size from trade to trade or day to day based on equity curve changes, is gonna be a real hindrance. Both due to the excessive friction of having the wrong size on(small right before you get a run up, large right before the wheels come off, rinse + repeat 10 times a day/week), and the fact that granularity will likely kill you as you start small.

so KISS . do 1 lots for 1-2months. if it works and you are happy(i doubt it) , don't waste time with incremental advances. Do as much as you can , that is still prudent in terms of %account@risk if you screw the pooch. Short-term edges are notoriously variable, you gotta milk it while you can, if you dare.
Also, stop early on, if adverse performance is encountered, when these things break they usually go wrong reaaaaally badly(not just a couple of times worse than pre historical drawdown, more like 10-20 times worse!).

just so you know, i have personally known many, many ,many short-term traders try and fail at applying short term SYSTEMATIC strategies. imho short-term is an art form, and needs the much faster-adapting trading "logic" of a discretionary approach that takes into account inputs of various different classes(news flow, order-book,price, value, volume etc, not just momentum analysis) and selects from what seems to be driving the market at that moment.

[one could point out that "High-frequency trading" is systematic, well yes, but it is extremely engineered to microstructure and orderbook analysis, and is not the same as intraday momentum/volatility capture that you seem to be describing)

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Post by AFJ Garner » Fri Mar 25, 2011 10:13 am

rabidric wrote:
stick to 1 lots for as long as you can bear, then rapidly "advance" your size to zero.
Not everyone would agree with that. Tom Shanks says in a recent interview "we have become more and more short term in recent years". I have no idea how he defines short term.

http://www.futuresmag.com/Issues/2011/M ... assic.aspx

And then of course there are the lightspeed trading bots:

http://www.bbc.co.uk/news/science-environment-12827752

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Post by rajivm » Fri Mar 25, 2011 1:34 pm

Chris67 wrote:The best system of managing money for a short term system (in my experience only - which says it all - probably? - about my ability to design a short term system) is to take your money and heap in on an open fire place.
That way you get exactly the same resuly over the long run - but without any of the immense workload during that period :D
IT is quite possible to develop excellent short term strategies using Trading blox..IF YOU are ready to move away from TRENDFOLLOWING MindSET..
Thanks to Sluggo whose posts about how NOT using intraday data and lethargy hurts our performance helped me develop this system based on hourly data
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Post by sluggo » Fri Mar 25, 2011 2:16 pm

Jan_2004 equity = 5.0E4
Jan_2011 equity = 1.7E8

CAGR (%/yr) = 100 * (-1 + (1.7E8 / 5.0E4)^(1/7) ) = 220% / yr

This is a very large CAGR%. Much much larger than the CAGR% of most professional money managers.

BARLI
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Post by BARLI » Fri Mar 25, 2011 6:08 pm

rajivm wrote:
Chris67 wrote:The best system of managing money for a short term system (in my experience only - which says it all - probably? - about my ability to design a short term system) is to take your money and heap in on an open fire place.
That way you get exactly the same resuly over the long run - but without any of the immense workload during that period :D
IT is quite possible to develop excellent short term strategies using Trading blox..IF YOU are ready to move away from TRENDFOLLOWING MindSET..
Thanks to Sluggo whose posts about how NOT using intraday data and lethargy hurts our performance helped me develop this system based on hourly data
rajivm, do you trade it?

Guys, thanks for feedback, but numbers would be helpful..rajivm, what MM do you use in yours?

rajivm
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Post by rajivm » Fri Mar 25, 2011 9:24 pm

BARLI wrote:
rajivm wrote:
Chris67 wrote:The best system of managing money for a short term system (in my experience only - which says it all - probably? - about my ability to design a short term system) is to take your money and heap in on an open fire place.
That way you get exactly the same resuly over the long run - but without any of the immense workload during that period :D
IT is quite possible to develop excellent short term strategies using Trading blox..IF YOU are ready to move away from TRENDFOLLOWING MindSET..
Thanks to Sluggo whose posts about how NOT using intraday data and lethargy hurts our performance helped me develop this system based on hourly data
rajivm, do you trade it?

Guys, thanks for feedback, but numbers would be helpful..rajivm, what MM do you use in yours?
Yes,
I trade it...But I have traded it only for 2-3 months so far. It is a stock market system.
MM simple...At any time..Keep max open position limited to 10 divided equally among all positions..and no leverage.

rajivm
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Post by rajivm » Fri Mar 25, 2011 9:30 pm

sluggo wrote:Jan_2004 equity = 5.0E4
Jan_2011 equity = 1.7E8

CAGR (%/yr) = 100 * (-1 + (1.7E8 / 5.0E4)^(1/7) ) = 220% / yr

This is a very large CAGR%. Much much larger than the CAGR% of most professional money managers.
Yes Sluggo,
Back simulations - 207% with 18% max drawdown...
But I feel the problem will arise when postions sizes to be taken becomes large. So why would money mangers want to use it.
but for me it is working fine for me because my account size is much smaller than money managers.

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