Money management and position sizing - Trading-Lab

hedger · #1 07-05-2007, 08:41 PM

Hi everyone,

I'm currently researching and working on a few money management rules I would like to incorporate into my system trading strategies.

if you allowed your trading system to risk, let's say, 1% per trade, would you prefer to risk that 1% by buying small positions and using wider stops or would you go with bigger positions and tighter stops?

regards,

ProTrader · #2 07-09-2007, 04:09 PM

Whether you should go with tight stops/big size rather than wide stops/small size depends on how good you are with your entries. A badly timed entry calls for a wider stop and smaller size. If you are very good with entries, you can afford to put more size on it and use tighter stops. so it all depends on your entries IMHO

Alchemist · #3 07-11-2007, 02:33 PM

Hello hedger,

first of all, you should tell us what products you are trading. money management rules and position sizing may vary a lot, depending on the instruments traded.

a more general answer would be that how much you are willing to risk per trade depends on your overall risk tolerance level and the volatility of the markets you trade.

hedger · #4 07-16-2007, 01:38 PM

hello,

thanks for your responses.

I develop trading systems on US equities, mostly NYSE. A sample of the stocks I trade might be the Dow 30 components.

I understand your point of view regarding the products you trade and their volatilities. As a matter of fact, that is what I'm trying to determine: how to account for variance in my money management rules.

ManhattanTrader · #5 07-20-2007, 11:48 AM

Dow 30 components are not crazy, volatile stocks. You can use 1% risk per trade as a starting parameter no problem. Try that out and see how your system fares.

ChaosTheory · #6 07-30-2007, 04:45 PM

I think you should have some kind of volatility based rule where the only thing you control is position sizing.

hedger · #7 08-06-2007, 12:56 PM

thanks for your input. I'm working on a few interesting money management ideas. I'll keep you posted!

ouch · #8 08-24-2007, 12:45 PM

I like to use an EMA channel for my swing trading plays. I like to target the upper portion of the channel and place the stop halfway between the low of the pullback and the lower trend line.

Leth · #9 10-07-2007, 01:27 AM

backtest and let us know what you come up with.

newbie · #10 11-05-2007, 06:42 PM

what do you mean exactly by "backtest"?

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#1 07-05-2007, 08:41 PM
hedger Member Join Date: Jun 2007 Posts: 38	Money management and position sizing Hi everyone, I'm currently researching and working on a few money management rules I would like to incorporate into my system trading strategies. if you allowed your trading system to risk, let's say, 1% per trade, would you prefer to risk that 1% by buying small positions and using wider stops or would you go with bigger positions and tighter stops? regards,

#2 07-09-2007, 04:09 PM
ProTrader Senior Member Join Date: Jun 2007 Posts: 109	Whether you should go with tight stops/big size rather than wide stops/small size depends on how good you are with your entries. A badly timed entry calls for a wider stop and smaller size. If you are very good with entries, you can afford to put more size on it and use tighter stops. so it all depends on your entries IMHO

#3 07-11-2007, 02:33 PM
Alchemist founder of Trading-Lab Join Date: May 2007 Location: New York, NY Posts: 296	Hello hedger, first of all, you should tell us what products you are trading. money management rules and position sizing may vary a lot, depending on the instruments traded. a more general answer would be that how much you are willing to risk per trade depends on your overall risk tolerance level and the volatility of the markets you trade. __________________ Happy Trading!

#4 07-16-2007, 01:38 PM
hedger Member Join Date: Jun 2007 Posts: 38	hello, thanks for your responses. I develop trading systems on US equities, mostly NYSE. A sample of the stocks I trade might be the Dow 30 components. I understand your point of view regarding the products you trade and their volatilities. As a matter of fact, that is what I'm trying to determine: how to account for variance in my money management rules.

#5 07-20-2007, 11:48 AM
ManhattanTrader Member Join Date: Jun 2007 Posts: 45	Dow 30 components are not crazy, volatile stocks. You can use 1% risk per trade as a starting parameter no problem. Try that out and see how your system fares.

#6 07-30-2007, 04:45 PM
ChaosTheory Member Join Date: Jul 2007 Posts: 44	I think you should have some kind of volatility based rule where the only thing you control is position sizing.

#7 08-06-2007, 12:56 PM
hedger Member Join Date: Jun 2007 Posts: 38	thanks for your input. I'm working on a few interesting money management ideas. I'll keep you posted!

#8 08-24-2007, 12:45 PM
ouch Junior Member Join Date: Jul 2007 Posts: 24	I like to use an EMA channel for my swing trading plays. I like to target the upper portion of the channel and place the stop halfway between the low of the pullback and the lower trend line.

#9 10-07-2007, 01:27 AM
Leth Super Moderator Join Date: Oct 2007 Posts: 621	backtest and let us know what you come up with. Last edited by Leth : 10-07-2007 at 02:03 PM.

#10 11-05-2007, 06:42 PM
newbie Member Join Date: Oct 2007 Posts: 45	what do you mean exactly by "backtest"?