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Casual Articles - Money Management In Futures Trading
Late last year I was presenting a workshop for the senior managers of a major organisation. Whilst doing a pre-workshop survey to assess the challenges these managers were experiencing it became very apparent to me that many of them were showing the signs of business burn-out. And it was no wonder why. They were suffering from 'Priority Problems'. Quite simply they were making the mistake of doing the urgent rather than the important tasks.They were working extremely long hours, with no time for
[Note: The spreadsheet assumes that a base amount of $2,000 is required to fund a trading account, and only calculates a fixed percentage on amounts in excess of this. It will always trade at least 1 contract, so long as there is a balance greater than $2,00
The biometric time clock helps to gain the objectives of security, convenience, and accuracy, which is of great importance in contemporary working environments. Biometric time clock maintenance requires professionalism, even though the maintenance cost is low. The parts of biometric clocks are easily available and can be replaced to give more perfection.The hand reader is the main part of the equipment; it is where the employee places the hand for the image to be scanned accordingly and checke
MM is relevant to all forms of trading, but it is particularly powerful in short term futures trading. It is the tool that utilizes LEVERAGE to dramatically accelerate the growth of your account.
Leverage is a double edged sword and must be treated with respect. But there is little point in choosing futures as your investment vehicle if you are not prepared to use it (with due caution).
MM comes in several different flavours, but I am going to focus on one technique known as the "fixed percentage" method.
In this method, the trader calculates a fixed percentage of available capital prior to entering a trade, then divides this by the risk amount in the trade to determine how many contracts to enter.
For example, if capital is $8,000, the chosen fixed percentage is 5% ($400), and the risk per contract is $175, then you would use 2 contracts ($175 into $400 goes 2 times).
The biggest decision you have to make is to choose the percentage. The larger the percentage, the greater the leverage. The greater the leverage, the greater the risk of ruin. Obviously, if you risk 20% on each trade, a run of 3 or 4 consecutive losses will decimate the account. However, the same bad run would not have a major impact if you risk 2.5% per trade.
Professional money managers with large accounts usually choose 2.5% or less. Given a strategy with a positive expectancy, this keeps the risk of ruin very close to zero.
A trader with a small account may need to choose a higher percentage to accelerate earnings. Doing so introduces a significant risk of ruin which gets bigger as the percentage increases.
To illustrate the power of MM, look at a series of results from a simple trading strategy in the soybean markets. Example 1 shows the results of using the strategy with a fixed percentage of 2.5% and a starting capital of $4,000. Notice that the number of contracts never gets above 1 implying that MM is not effective in this period. Nevertheless, growth is impressive with the initial capital of $4,000 growing to $6,738 (68%).
[Note: The spreadsheet assumes that a base amount of $2,000 is required to fund a trading account, and only calculates a fixed percentage on amounts in excess of this. It will always trade at least 1 contract, so long as there is a balance greater than $2,00
Many people believe that adding AdSense makes your website look cheap and less convincing. Yet others who put up new sites say that the Search Engines give too much credit to older websites, many of which have no new pages on them and have not been upgraded in years, thus they are now littering the Internet. The debate rages on.In all this debate few can deny that many new websites have popped up that have irrelevant information on them and their sole purpose is to generate mone
MM comes in several different flavours, but I am going to focus on one technique known as the "fixed percentage" method.
In this method, the trader calculates a fixed percentage of available capital prior to entering a trade, then divides this by the risk amount in the trade to determine how many contracts to enter.
For example, if capital is $8,000, the chosen fixed percentage is 5% ($400), and the risk per contract is $175, then you would use 2 contracts ($175 into $400 goes 2 times).
The biggest decision you have to make is to choose the percentage. The larger the percentage, the greater the leverage. The greater the leverage, the greater the risk of ruin. Obviously, if you risk 20% on each trade, a run of 3 or 4 consecutive losses will decimate the account. However, the same bad run would not have a major impact if you risk 2.5% per trade.
Professional money managers with large accounts usually choose 2.5% or less. Given a strategy with a positive expectancy, this keeps the risk of ruin very close to zero.
A trader with a small account may need to choose a higher percentage to accelerate earnings. Doing so introduces a significant risk of ruin which gets bigger as the percentage increases.
To illustrate the power of MM, look at a series of results from a simple trading strategy in the soybean markets. Example 1 shows the results of using the strategy with a fixed percentage of 2.5% and a starting capital of $4,000. Notice that the number of contracts never gets above 1 implying that MM is not effective in this period. Nevertheless, growth is impressive with the initial capital of $4,000 growing to $6,738 (68%).
[Note: The spreadsheet assumes that a base amount of $2,000 is required to fund a trading account, and only calculates a fixed percentage on amounts in excess of this. It will always trade at least 1 contract, so long as there is a balance greater than $2,00
If you hold information you hold knowledge and power and it is worth something, but how much? Well we know from intrinsic valuations that something is worth whatever someone else will give you for it. But how much will they give you? Ah ha, now you see why selling information can be such a tricky job and why it can be such a lucrative career. The key is to finding who needs the information most and what they are willing to pay you for it. Then you must make protect the information so you can sell it ag
The biggest decision you have to make is to choose the percentage. The larger the percentage, the greater the leverage. The greater the leverage, the greater the risk of ruin. Obviously, if you risk 20% on each trade, a run of 3 or 4 consecutive losses will decimate the account. However, the same bad run would not have a major impact if you risk 2.5% per trade.
Professional money managers with large accounts usually choose 2.5% or less. Given a strategy with a positive expectancy, this keeps the risk of ruin very close to zero.
A trader with a small account may need to choose a higher percentage to accelerate earnings. Doing so introduces a significant risk of ruin which gets bigger as the percentage increases.
To illustrate the power of MM, look at a series of results from a simple trading strategy in the soybean markets. Example 1 shows the results of using the strategy with a fixed percentage of 2.5% and a starting capital of $4,000. Notice that the number of contracts never gets above 1 implying that MM is not effective in this period. Nevertheless, growth is impressive with the initial capital of $4,000 growing to $6,738 (68%).
[Note: The spreadsheet assumes that a base amount of $2,000 is required to fund a trading account, and only calculates a fixed percentage on amounts in excess of this. It will always trade at least 1 contract, so long as there is a balance greater than $2,00
Have you ever used an online website design builder? If so you may have been left with a less than professional website. Most of these tools are not what you would call a professional solution for designing or building your website. No matter how hard you try they are not going to turn out a professional website.These tools will insert poor code and a lot of time your website will suffer from "code bloat" in other words there will be a lot of extra code that you are not even usi
A trader with a small account may need to choose a higher percentage to accelerate earnings. Doing so introduces a significant risk of ruin which gets bigger as the percentage increases.
To illustrate the power of MM, look at a series of results from a simple trading strategy in the soybean markets. Example 1 shows the results of using the strategy with a fixed percentage of 2.5% and a starting capital of $4,000. Notice that the number of contracts never gets above 1 implying that MM is not effective in this period. Nevertheless, growth is impressive with the initial capital of $4,000 growing to $6,738 (68%).
[Note: The spreadsheet assumes that a base amount of $2,000 is required to fund a trading account, and only calculates a fixed percentage on amounts in excess of this. It will always trade at least 1 contract, so long as there is a balance greater than $2,00
As a former personal protection operative and present business/career coach, I have had the opportunity to be on both sides of the fence, so to speak, in regards to being hired as- and hiring personal protection.Any executive or other businessmen looking for a protection should take certain things into consideration, unknown to most people.A. If a bodyguard is needed in a certain area, so is local knowledge. Do not fall into the trap of solely hiring someone from your own backyard, if you
[Note: The spreadsheet assumes that a base amount of $2,000 is required to fund a trading account, and only calculates a fixed percentage on amounts in excess of this. It will always trade at least 1 contract, so long as there is a balance greater than $2,000.]
Example 2 shows the same period and same starting capital traded with a fixed percentage of 10%. Now the account grows to $10,812 (170%).
For anybody courageous or reckless enough to trade the account with a fixed percentage risk of 20%, Example 3 shows that the account grows to $18,700 (367%).
Notice that these results were based on a trading period of less than 3 months from 6th February to 26th March, 2007. You can see that the annualized returns are staggering.
Despite the mouthwatering returns from higher fixed percentages, statistics always catch up with you in the end. If you trade long enough, you will encounter a sequence of trades which will ruin you.
So, if you have got away with using a high percentage to successfully grow your account to a reasonable amount, consider adopting one of the following options as a matter of urgency:
- Reduce the fixed percentage to 2.5% or less.
- Withdraw most of your profits, and start building up from the small capital base again. Keep enough back in your savings to re-fund the account, if necessary.
Email me at the address shown on my website if you would like a copy of the spreadsheet.
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