How to manage position sizing better?

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oem7110
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How to manage position sizing better?

Post by oem7110 » Sun Nov 07, 2010 7:20 am

When I trade based on bollinger bands for range strategy, I short at the top of BB, and long at the bottom of BB. Whenever price touch BB at 2 SDev at the bottom, then I place a long position, if price drops tomorrow, then price touch BB at 2 SDev at the bottom again, I place another long position for averaging the cost, and expect price going up on the next day, then the sum of the order is profitable. If market keeps going within range market forever, I will be rich with this range strategy, once a range market becomes a trend market, price keep dropping more than 5 days, as I define market to be trend, then at this moment, I would follow the trend and cover long and go short position, but I have been lose a lot of money switching from range to trend market within 5 days. Noone knows when the market will change from range to trend market, does anyone have any suggestions on how to manage position sizing better [or how to manage position better] to maximize the profit and minimize the lose?
Thanks in advance for any suggestions
Eric

LeviF
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Post by LeviF » Sun Nov 07, 2010 8:35 am

How about sharing your backtesting results of this strategy?

oem7110
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Post by oem7110 » Sun Nov 07, 2010 9:15 am

With no backtesting results, do you have any suggestions on how to manage this situation rather than fit the situation based on backtest?
Thanks in advance for any suggestions

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Post by RedRock » Sun Nov 07, 2010 1:34 pm

perhaps split them into two separate systems (if not already).

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Post by babelproofreader » Sun Nov 07, 2010 6:22 pm

Two ideas - first, try to develop some method of identifying when markets are ranging, independent of your BB system signals, and only take your BB signals when this method indicates a ranging market. Second, add some kind of filter (candlesticks?) to tell you that price is reacting positively to the BB SDev touch before placing your trades.

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Post by sluggo » Sun Nov 07, 2010 8:31 pm

One possibility is to make position size proportional to (the reciprocal of volatility). See Way of the Turtle pp.252-255. (LINK)

oem7110
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Post by oem7110 » Sun Nov 07, 2010 8:58 pm

sluggo wrote:One possibility is to make position size proportional to (the reciprocal of volatility). See Way of the Turtle pp.252-255. (LINK)
But this is not the money management approach to recover the losing position on previous trades, I would like to recover the previous losing position by scaling up or down the position sizing - money management approach, so my loss positions can recover no matter market go up or down.

Thanks everyone very much for any suggestions

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Post by LeviF » Sun Nov 07, 2010 10:21 pm

I would be very surprised if trading within the bands has a positive expectancy.

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Post by oem7110 » Mon Nov 08, 2010 12:49 am

RedRock wrote:perhaps split them into two separate systems (if not already).
I have used two separate systems, one is range and the other is trend, so the grey area is to work on how to manage this possible changing situations from range to trend, in order to minimize the loss.

Does anyone have any suggestions?

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Post by RedRock » Mon Nov 08, 2010 12:52 am

Double up, to belly up...?

There are much tighter bets if martingale is your thing. Wasn't Mr. Vince expounding a method where you don't loose.

Is doubling up a looser better that taking a managed trend bet to begin with?
Or would you continue adding size if the trend matured? Would there be profit taking exits? Perhaps once break even was reached the position is lightened? But again, is this better than a simple breakout with modest size?

What is the W/L ratio of the band fader? It was a loosing deal by itself, but I hadn't tested taking the breakout using a gamblers mind. Could be satisfying in a way. No results to wet appetites?
Last edited by RedRock on Mon Nov 08, 2010 12:57 am, edited 1 time in total.

oem7110
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Post by oem7110 » Mon Nov 08, 2010 12:54 am

babelproofreader wrote:Two ideas - first, try to develop some method of identifying when markets are ranging, independent of your BB system signals, and only take your BB signals when this method indicates a ranging market. Second, add some kind of filter (candlesticks?) to tell you that price is reacting positively to the BB SDev touch before placing your trades.
Range Market:
Starting from the first touching point, where the low price cross below lower BB 2 SDev line, if price still below this levels on any date after the fifth day, then market is changing from range into trend, otherwise I still consider this is a range market.

When low price cross below lower BB 2 SDev line, I hold 1 long position,
if price keeps dropping on the next four day, then I add 1 long position on each day for averaging the cost, and expect the price would not drop on the fifth day for range market, otherwise, changing to trend strategy by cutting stop loss. However, on the first day of the trend market, I loss money for holding 4 long positions on previous trades, I would like to recover the losing money from previous trade, but the market can keep either going down or going up.
Does anyone have any suggestions on how to manage the position sizing? so my losing money can recover no matter what direction of market goes.
some kind of filter (candlesticks?) to tell you that price is reacting positively to the BB SDev touch before placing your trades.
Do you have any suggestions on how this filter adjusts the position sizing for recovering the previous lose trades?

Thank everyone very much for any suggestions

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