What Money Management do you use ?

• 05/24/2020 at 10:11 AM #133014
  zilliq

  Hi Guys,

  I found it as a good day to speak about the most important thing in (Algo) trading : Money Management !

  We can’t do a survey on the forum, but the simple question is : What Money Management do you use in your trading/algo trading, and what do you think is the worst ?

  Personnaly, I use trading with constant position size (Van Tharp Method) with Trailing stop and Breakeven as soon as price touch my first step (Scaling Out trading)

  My worst is probably to scale in trade (Take a new position every atr step for example). Very interesting on paper but difficult to have a good R/R ratio

  It’s up to you 🙂

  Have a nice day

  

  zilliq

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  05/24/2020 at 10:47 AM #133019
  GraHal

  Constant and also minimum position size until I see that an Auto-System gives consistent and logical entry and exit points and no scary times! 🙂

  

  GraHal

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  05/24/2020 at 11:01 AM #133020
  zilliq

  GraHal wrote:

  Constant and also minimum position size until I see that an Auto-System gives consistent and logical entry and exit points and no scary times! 🙂

  Thanks for your answer.

  So no Trailingstop or breakeven (And constant position as me) ?

  

  zilliq

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  05/24/2020 at 11:04 AM #133021
  zilliq

  As we haven’t survey on forum I will do “like a survey” based on your answers  🙂

   

  Constant position size : 2

  Breakeven : 1

  Trailing stop : 1

  Scaling out Trade : 1

  Scaling Into Trade : 0

   

  “scaling into a trade means that you enter with just a fraction of the intended amount that you wish to trade and then add to the position as the trade develops. scaling out means that you exit fractions of your position to lock in profit and leave in positions to take advantage of any further price runs”

  

  zilliq

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  05/24/2020 at 11:40 AM #133025
  GraHal

  We used to have a Survey function on here, but Nicolas got rid of it because it was not being used and may have been slowing the site down or some such webmaster concern!

  I do scale in and out when manual trading.

  We can’t scale out when Auto-trading.

  Yes I do use Trailing Stop, but mostly TP and SL … but I think that is mainly because by the time I’ve coded up entry conditions I need to get the System into Forward Test and do other things!!  🙂

  Be easier if there was a Survey function?  I set a couple up so I did use the survey function, but hardly anybody answered … just as you may find zilliq on this survey? 🙁

  

  GraHal

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  05/24/2020 at 11:59 AM #133028
  Vonasi

  There are only really two reasons to use money management.

  • To protect your capital.
  • To try to get rich quicker.

   

  If you reduce position size as you lose money then you are protecting your capital. If you increase position size as you win more money then you are trying to get richer quicker. If you do the latter and never do the former and your position size is too big compared to your capital then you risk blowing up your account.

  So everyone has to decide their own risk to reward ratio. Do you like your money or are you happy to never see it again if your gamble does not pay off?

  The best money management rule is to start with a lot of money that you can afford to lose!

  

  Vonasi

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  05/24/2020 at 12:21 PM #133031
  zilliq

  GraHal wrote:

  We used to have a Survey function on here, but Nicolas got rid of it because it was not being used and may have been slowing the site down or some such webmaster concern!

  I do scale in and out when manual trading.

  We can’t scale out when Auto-trading.

  Yes I do use Trailing Stop, but mostly TP and SL … but I think that is mainly because by the time I’ve coded up entry conditions I need to get the System into Forward Test and do other things!! 🙂

  Be easier if there was a Survey function? I set a couple up so I did use the survey function, but hardly anybody answered … just as you may find zilliq on this survey? 🙁

  Most of my algos have a ratio stoploss/target>1 (I check the 30 last one but didn’t find one with<1) so I didn’t see that we can’t scale out on auto-trading ! It always worked on backtest but with worst results that’s why I don’t have this ratio<1

  It’s crazy if so. I will force an algo to try. @nicolas can you confirm we can’t scale out on 2, 3* ATR before I test tomorrow?

  Thanks @grahal for this infos 😉

  

  zilliq

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  05/24/2020 at 12:25 PM #133033
  Eric

  About scale out on auto-trading

  If you run 2 system instead of 1 you can have different exits

  Instead of trading 1 system with size 2

  You can run 1 (size 1) with 1.5 risk/reward (50 point stop and TP 75)

  and 1 (size 1) with a trailing stop (50 point) and no TP

  or maybe 2 with TP and 1 with trailing stop?

  

  Eric

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  05/24/2020 at 12:25 PM #133034
  zilliq

  Thanks @eric

  We already have a previous discussion on it (May be on french forum sorry), and I do a lot of tests/backtests and you can do this but it’s different to have scale out trade on results

  

  zilliq

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  05/24/2020 at 12:29 PM #133035
  zilliq

  Vonasi wrote:

  There are only really two reasons to use money management.

  • To protect your capital.
  • To try to get rich quicker.

  If you reduce position size as you lose money then you are protecting your capital. If you increase position size as you win more money then you are trying to get richer quicker. If you do the latter and never do the former and your position size is too big compared to your capital then you risk blowing up your account.

  So everyone has to decide their own risk to reward ratio. Do you like your money or are you happy to never see it again if your gamble does not pay off?

  The best money management rule is to start with a lot of money that you can afford to lose!

  Quite agree with you @Vonassi, but I really think Money management is the second key after strategy (But people always look for the Graal strategy)

  What Money management do you generally use on your algos please ?

  

  zilliq

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  05/24/2020 at 12:30 PM #133036
  Vonasi

  Please try not to quote posts that have quoted posts that have quoted posts! It makes the topic very long and difficult to read. You can quote just a section of text by highlighting it and clicking quote. You do not need to quote whole posts.

   I have deleted unnecessary quotes.

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  05/24/2020 at 12:34 PM #133038
  Vonasi

  zilliq wrote:

  What Money management do you generally use on your algos please ?

  I’m in the cautious school of protecting capital. I prefer to first start with the smallest stake possible and that generally means reducing position size is not possible anyway. If a strategy is performing OK then I might switch on very light money management to slowly increase position size if equity is increasing.

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  05/24/2020 at 12:38 PM #133040
  Vonasi

  zilliq wrote:

  
  @nicolas can you confirm we can’t scale out on 2, 3* ATR before I test tomorrow?

  IG do not allow partial position closure in live trading so scaling out is impossible in an auto strategy. As Eric said running multiple strategies that all enter at the same time but exit at different times is as close as we can get.

  We can back test with partial position closure because the PRT platform is set up to allow this but the broker does not allow it in live trading.

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  05/24/2020 at 12:40 PM #133041
  GraHal

  zilliq wrote:

  Most of my algos have a ratio stoploss/target>1 (I check the 30 last one but didn’t find one with<1) so I didn’t see that we can’t scale out on auto-trading !

  What does ratio stoploss/target have to do with scaling out??

  I always try to have my ratio stoploss/target as near to 2 or more … as the System works okay with … TP = 2 x SL .

  

  GraHal

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  05/24/2020 at 12:51 PM #133044
  zilliq

  GraHal wrote:

  zilliq wrote:

  Most of my algos have a ratio stoploss/target>1 (I check the 30 last one but didn’t find one with<1) so I didn’t see that we can’t scale out on auto-trading !

  What does ratio stoploss/target have to do with scaling out??

  I always try to have my ratio stoploss/target as near to 2 or more … as the System works okay with … TP = 2 x SL .

  I did backtets to exit 1/3 at 1*stoploss, 1/3 at 2 stoploss and the last 1/3 at 3 stoploss for example

  But I always find worst results than to have a target at less than one stoploss (but you need more winning trades when you have thus ratio<1)

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