O.k I've drawn up a spreadsheet which shows all possible out comes of 5 trades. I think all the calculations are correct.
% risk, Balance and and Risk Reward ratio are all adjustable to your risk appetite.
What I notice though about the result though is for it to be considered better you need to be getting a streak of 3 trades or better, not 2 trades as I initially thought.
Drunka you are correct. I think some of the effect of the Last Trade Risk management system is psychological as you are only risking the gains on your account. Its more interested in the win streaks than in drawdown. But if you are increasing the Risk in ordinary % risk you are also increasing it in LastTradeRisk
Alternative Money Management Strategy
-
- Trader
- Posts: 53
- Joined: Sun Aug 26, 2012 5:00 pm
Alternative Money Management Strategy
You do not have the required permissions to view the files attached to this post.
-
- Trader
- Posts: 86
- Joined: Thu Dec 11, 2014 8:05 pm
Alternative Money Management Strategy
btw I think I misscalculated the last system data
this should be correct (2,5% on deposit / 5% on winning pot)
25+2,5 = 27,5
27,5 + 2,75 + 25 = 55,25
55,25 + 5,525 + 25 = 85,775
85,775 + 8,58 + 25 = 119,35
119,35 + 11,94 + 25 = 156,29
-7,814 -12,5
==========
135,98
+ 500 deposit
==========
636
anyway do some deep testing. Define your max allowed drawdown, the sum you want to make in a certain amount of time. Collect some real trading data or at least demo from your trading system with at least 100 cases and then start Monte-Carlo-Simulations with different money management strategies. You could use software like R (free) or spss for the calculations. Without decent data and simulations you can't really tell if your strategy makes sense.
cheers
this should be correct (2,5% on deposit / 5% on winning pot)
25+2,5 = 27,5
27,5 + 2,75 + 25 = 55,25
55,25 + 5,525 + 25 = 85,775
85,775 + 8,58 + 25 = 119,35
119,35 + 11,94 + 25 = 156,29
-7,814 -12,5
==========
135,98
+ 500 deposit
==========
636
anyway do some deep testing. Define your max allowed drawdown, the sum you want to make in a certain amount of time. Collect some real trading data or at least demo from your trading system with at least 100 cases and then start Monte-Carlo-Simulations with different money management strategies. You could use software like R (free) or spss for the calculations. Without decent data and simulations you can't really tell if your strategy makes sense.
cheers
-
- Trader
- Posts: 53
- Joined: Sun Aug 26, 2012 5:00 pm
Alternative Money Management Strategy
LOL , Programming stats in R , I cant even handle a spreadsheet. I cant seem to find the error you mentioned. If you could correct it and post it again that would be great.
But in all seriousness that would probably be the way forward to do a longer term Monte Carlo test of the system. I might look into learning a bit of R.
I trade my own variation on this system when I trade manually. Only I use it to scale into the positions up to the maximum of the last trade but trying to keep a break-even stop. It works well for me it keeps the bad losses hopefully to a minimum, I've only had one bad trade in the last 6 months that lost me about 25% but I when it happened I felt more psychological accepting of it.
But in all seriousness that would probably be the way forward to do a longer term Monte Carlo test of the system. I might look into learning a bit of R.
I trade my own variation on this system when I trade manually. Only I use it to scale into the positions up to the maximum of the last trade but trying to keep a break-even stop. It works well for me it keeps the bad losses hopefully to a minimum, I've only had one bad trade in the last 6 months that lost me about 25% but I when it happened I felt more psychological accepting of it.
-
- Trader
- Posts: 53
- Joined: Sun Aug 26, 2012 5:00 pm
Alternative Money Management Strategy
O.k little more exploration into this.
Wrote up this little python script to do some Monticarlo simulations on this. Looked into R, then gave up but it would probably give us more detailed results.
Using data over 100000 trades
For Last-trade to be more profitable with 2:1 Risk Reward you need to be getting a Win % of at least 38%, Less than that and you would be better of with standard risk. R:R is inversely proportional to Win% so you need to increase your win-rate as R:R goes down.
If your using 1:1 risk reward or less you are better off with standard risk.
Need to look at adding a drawdown figure
I'll try and present it a bit better but to be going on with heres a python file to experiment with changeable variable at the top.
Wrote up this little python script to do some Monticarlo simulations on this. Looked into R, then gave up but it would probably give us more detailed results.
Using data over 100000 trades
For Last-trade to be more profitable with 2:1 Risk Reward you need to be getting a Win % of at least 38%, Less than that and you would be better of with standard risk. R:R is inversely proportional to Win% so you need to increase your win-rate as R:R goes down.
If your using 1:1 risk reward or less you are better off with standard risk.
Need to look at adding a drawdown figure
I'll try and present it a bit better but to be going on with heres a python file to experiment with changeable variable at the top.
You do not have the required permissions to view the files attached to this post.
- PJSantos100
- Trader
- Posts: 16
- Joined: Sun Sep 04, 2016 4:36 am
- Location: Dubai but Portuguese :)
Alternative Money Management Strategy
Very Old post but good idea... i'll try to see it with Pips instead of Currency reward...
Cheers
Cheers
-
- Trader
- Posts: 89
- Joined: Fri Oct 25, 2013 5:23 am
Alternative Money Management Strategy
I love the aspect of using a past result to inform a decision robotically. However, it's quite Martingale.
Let's try to flesh it out a bit more.
1) Monthly trading budget from salary. Prepared to lose this.
Example = $1000
2) Starting trade size = 2%
because this is
3) Example number of trades allowed per month = 4. Averaging 1 per week. (I trade the monthly)
4) Trade size after first win = 2% + win
5) Trade size after loss = Percentage - loss size
Let's try to flesh it out a bit more.
1) Monthly trading budget from salary. Prepared to lose this.
Example = $1000
2) Starting trade size = 2%
because this is
3) Example number of trades allowed per month = 4. Averaging 1 per week. (I trade the monthly)
4) Trade size after first win = 2% + win
5) Trade size after loss = Percentage - loss size
- tomele
- Administrator
- Posts: 1166
- Joined: Tue May 17, 2016 3:40 pm
- Location: Germany, Forest of Odes, Defending the Limes
Alternative Money Management Strategy
Yawn. 3 years later. Thread closed.
Happy pippin, Thomas
It ain't what you don't know that gets you into trouble.
It's what you know for sure that just ain't so. (Mark Twain)
Keep the coder going: Donate
It ain't what you don't know that gets you into trouble.
It's what you know for sure that just ain't so. (Mark Twain)
Keep the coder going: Donate