Aliassmith Psychology 101 and other stuff

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aliassmith
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Money Management for Short Term Trading

Postby aliassmith » Thu Oct 28, 2010 2:05 pm

I have been lurking around since my last post and "grinding it out" in the
trenches. :)

I believe I have something note worthy to share and give back to the
Kreslik community where I have been given so much.

A lot of the MightyOne posts rattle around in my head, over and over. I
have thought countless hours on his info. The parts about poker and
his last order adding process for long term trading stuck with me the
most.

The thing is I don't trade long term charts, but I know that MightyOne's
lessons can be adapted to short term trading. So I will share my adaptation
for those of us that are not "power traders" and willing to risk it all on
a single roll of the dice.

More Risk is More Risk
I remember this but didn't understand it for awhile. I did finally get the
meaning behind MightyOne's encrypted lesson. You will see as I move on
what it means.

I now envision trading as a poker game that has players available at any
level of play you desire. All the players sit at the virtual table of forex and
battle it out hand after hand and day after day. Each player having his own
style of play to create an edge.

So my poker roll is $10,000US and if I lose it I'll have to go make
deliveries to get a new roll like the guy in the movie Rounders. Now
who wants to do that? The focus is survival and profitability.

Phase 1 I buy into a game with $400 (4%). I get into a small stakes game
using 4:1 to 6.25:1 leverage and grind it out until I make $400 in profit.
What did I just do there? I took their money. So now I use their money
to take even more of their money.

Phase 2 I buy into a game with their $400 and get into a little higher stakes
game. My leverage will be 8:1 to 12.5:1 and I'll grind it out until I make $800 more.

Phase 3 I buy into a game with their $1200 for an even higher stakes
game. The leverage will be 16:1 to 25:1 and I grind it out until I make
$1600 more.

Phase 4 I buy into a game for their $2800 for an even higher stakes
game. The leverage will be 32:1 to 50:1 and I grind it out until I make
$3200 more.

The Poker Tournament is finished!

If you add it up I'll have took $6000 of their money and made it mine.
That is 60% return on my capital for a 4% risk. :)

Something to be clear about is you must start back at phase 1 when your
profit cushion is gone, you complete all the phases, or you are having a
hard time at the current phase and don't feel comfortable.

I above is an example and should be "tweaked" to fit individual styles of
trading.

If you are unclear about the More risk is More risk comment think about
this. I risk 4% of my capital which is about 80 to 100 pips to make 80 to
100 pips in phase 1. From phase 2 on I risk 0% of my capital to make the
additional 56%. :idea:
Trade Your Way as Long as It Makes Money!

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Postby es/pip » Sat Oct 30, 2010 1:29 am

Trading going good?

sounds like it is :D
Bend over and assume the position for another 4 years of hope and change.

cwn6161
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Re: Money Management for Short Term Trading

Postby cwn6161 » Sat Oct 30, 2010 4:38 am

aliassmith wrote:I have been lurking around since my last post and "grinding it out" in the
trenches. :)

I believe I have something note worthy to share and give back to the
Kreslik community where I have been given so much.

A lot of the MightyOne posts rattle around in my head, over and over. I
have thought countless hours on his info. The parts about poker and
his last order adding process for long term trading stuck with me the
most.

The thing is I don't trade long term charts, but I know that MightyOne's
lessons can be adapted to short term trading. So I will share my adaptation
for those of us that are not "power traders" and willing to risk it all on
a single roll of the dice.

More Risk is More Risk
I remember this but didn't understand it for awhile. I did finally get the
meaning behind MightyOne's encrypted lesson. You will see as I move on
what it means.

I now envision trading as a poker game that has players available at any
level of play you desire. All the players sit at the virtual table of forex and
battle it out hand after hand and day after day. Each player having his own
style of play to create an edge.

So my poker roll is $10,000US and if I lose it I'll have to go make
deliveries to get a new roll like the guy in the movie Rounders. Now
who wants to do that? The focus is survival and profitability.

Phase 1 I buy into a game with $400 (4%). I get into a small stakes game
using 4:1 to 6.25:1 leverage and grind it out until I make $400 in profit.
What did I just do there? I took their money. So now I use their money
to take even more of their money.

Phase 2 I buy into a game with their $400 and get into a little higher stakes
game. My leverage will be 8:1 to 12.5:1 and I'll grind it out until I make $800 more.

Phase 3 I buy into a game with their $1200 for an even higher stakes
game. The leverage will be 16:1 to 25:1 and I grind it out until I make
$1600 more.

Phase 4 I buy into a game for their $2800 for an even higher stakes
game. The leverage will be 32:1 to 50:1 and I grind it out until I make
$3200 more.

The Poker Tournament is finished!

If you add it up I'll have took $6000 of their money and made it mine.
That is 60% return on my capital for a 4% risk. :)

Something to be clear about is you must start back at phase 1 when your
profit cushion is gone, you complete all the phases, or you are having a
hard time at the current phase and don't feel comfortable.

I above is an example and should be "tweaked" to fit individual styles of
trading.

If you are unclear about the More risk is More risk comment think about
this. I risk 4% of my capital which is about 80 to 100 pips to make 80 to
100 pips in phase 1. From phase 2 on I risk 0% of my capital to make the
additional 56%. :idea:


I think I'm a tad confused about the risk portions. Below is the thought process in my head - where am I going wrong?

P1 - risk 4% ($400) to make $400 in 80-100 pips. Once made, close trade.

P2 - risk 8% (really 4% is original capital, 4% is profit) to make $800 in 80-100 pips. Once made, close trade.

P3 - risk 16% ( 4% original capital, 12% profit) to make $1600 in 80-100 pips. Once made, close trade.

P4 - risk 32% ( 4% original capital, 28% profit) to make $3200 in 80-100 pips. Once made, close trade.

Because you are increasing leverage and your stops/targets are the same amount, is the only thing changing your entry size? And in that case, isn't it 4% risk each time of base capital?

aliassmith
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Postby aliassmith » Sat Oct 30, 2010 1:28 pm

es/pip wrote:Trading going good?

sounds like it is :D


Glad to see you back! Not the same without you and MightyOne posting. :)
Trade Your Way as Long as It Makes Money!

aliassmith
rank: 1000+ posts
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Joined: Tue Jul 28, 2009 9:50 pm
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Re: Money Management for Short Term Trading

Postby aliassmith » Sat Oct 30, 2010 2:06 pm

cwn6161 wrote:
aliassmith wrote:I have been lurking around since my last post and "grinding it out" in the
trenches. :)

I believe I have something note worthy to share and give back to the
Kreslik community where I have been given so much.

A lot of the MightyOne posts rattle around in my head, over and over. I
have thought countless hours on his info. The parts about poker and
his last order adding process for long term trading stuck with me the
most.

The thing is I don't trade long term charts, but I know that MightyOne's
lessons can be adapted to short term trading. So I will share my adaptation
for those of us that are not "power traders" and willing to risk it all on
a single roll of the dice.

More Risk is More Risk
I remember this but didn't understand it for awhile. I did finally get the
meaning behind MightyOne's encrypted lesson. You will see as I move on
what it means.

I now envision trading as a poker game that has players available at any
level of play you desire. All the players sit at the virtual table of forex and
battle it out hand after hand and day after day. Each player having his own
style of play to create an edge.

So my poker roll is $10,000US and if I lose it I'll have to go make
deliveries to get a new roll like the guy in the movie Rounders. Now
who wants to do that? The focus is survival and profitability.

Phase 1 I buy into a game with $400 (4%). I get into a small stakes game
using 4:1 to 6.25:1 leverage and grind it out until I make $400 in profit.
What did I just do there? I took their money. So now I use their money
to take even more of their money.

Phase 2 I buy into a game with their $400 and get into a little higher stakes
game. My leverage will be 8:1 to 12.5:1 and I'll grind it out until I make $800 more.

Phase 3 I buy into a game with their $1200 for an even higher stakes
game. The leverage will be 16:1 to 25:1 and I grind it out until I make
$1600 more.

Phase 4 I buy into a game for their $2800 for an even higher stakes
game. The leverage will be 32:1 to 50:1 and I grind it out until I make
$3200 more.

The Poker Tournament is finished!

If you add it up I'll have took $6000 of their money and made it mine.
That is 60% return on my capital for a 4% risk. :)

Something to be clear about is you must start back at phase 1 when your
profit cushion is gone, you complete all the phases, or you are having a
hard time at the current phase and don't feel comfortable.

I above is an example and should be "tweaked" to fit individual styles of
trading.

If you are unclear about the More risk is More risk comment think about
this. I risk 4% of my capital which is about 80 to 100 pips to make 80 to
100 pips in phase 1. From phase 2 on I risk 0% of my capital to make the
additional 56%. :idea:


I think I'm a tad confused about the risk portions. Below is the thought process in my head - where am I going wrong?

P1 - risk 4% ($400) to make $400 in 80-100 pips. Once made, close trade.

P2 - risk 8% (really 4% is original capital, 4% is profit) to make $800 in 80-100 pips. Once made, close trade.

P3 - risk 16% ( 4% original capital, 12% profit) to make $1600 in 80-100 pips. Once made, close trade.

P4 - risk 32% ( 4% original capital, 28% profit) to make $3200 in 80-100 pips. Once made, close trade.

Because you are increasing leverage and your stops/targets are the same amount, is the only thing changing your entry size? And in that case, isn't it 4% risk each time of base capital?


So you are a little bit off I think. First thing is that it doesn't have to be
single trades. It can be used with scalping up to swing trading multiple
trades.

Phase 1 is the only phase where I risk my money. You can risk what you
want depending on your trading style. Risk 4% to make 4% or 1% to make
1% etc. It can be over 50 pips or 200 pips whatever.

Phase 2 I risk my "profit only" so I'll have 40 to 50 pips to work with trying
to make 80 to 100 pips.

The thing is it can be tweaked many different ways depending on comfort
level and trading style. The whole process is used to limit risking my
money and use other peoples money to take the risks.

Another reason it is used would be to push my wins. If you have ever
read Phantom of the Pits that would make more sense.

Unless you are a superstar trader like es/pip risking 1% = 5 pips each and
every trade with 90% accuracy then you need to figure out how to put less
of your capital at risk and push your wins.

At least in my mind I have it set-up to when I trade bad I risk the least
amount. When I am trading well I am risking larger amounts of other
people's money and none of mine. :)

So to recap with the basic formula:
P1 I risk x% of my base capital to make x%
P2 I risk only the profit I made in P1 (increase lot size)
P3 I risk only the profit I made in P1 and P2 (increase lot size more)
P4 I risk only the profit I made in P1,P2, and P3 (increase lot size more)
Go back to P1 recalculate with new account size.
Trade Your Way as Long as It Makes Money!

Please add www.kreslik.com to your ad blocker white list.
Thank you for your support.

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es/pip
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Re: Money Management for Short Term Trading

Postby es/pip » Sat Oct 30, 2010 2:14 pm

aliassmith wrote:
cwn6161 wrote:
aliassmith wrote:I have been lurking around since my last post and "grinding it out" in the
trenches. :)

I believe I have something note worthy to share and give back to the
Kreslik community where I have been given so much.

A lot of the MightyOne posts rattle around in my head, over and over. I
have thought countless hours on his info. The parts about poker and
his last order adding process for long term trading stuck with me the
most.

The thing is I don't trade long term charts, but I know that MightyOne's
lessons can be adapted to short term trading. So I will share my adaptation
for those of us that are not "power traders" and willing to risk it all on
a single roll of the dice.

More Risk is More Risk
I remember this but didn't understand it for awhile. I did finally get the
meaning behind MightyOne's encrypted lesson. You will see as I move on
what it means.

I now envision trading as a poker game that has players available at any
level of play you desire. All the players sit at the virtual table of forex and
battle it out hand after hand and day after day. Each player having his own
style of play to create an edge.

So my poker roll is $10,000US and if I lose it I'll have to go make
deliveries to get a new roll like the guy in the movie Rounders. Now
who wants to do that? The focus is survival and profitability.

Phase 1 I buy into a game with $400 (4%). I get into a small stakes game
using 4:1 to 6.25:1 leverage and grind it out until I make $400 in profit.
What did I just do there? I took their money. So now I use their money
to take even more of their money.

Phase 2 I buy into a game with their $400 and get into a little higher stakes
game. My leverage will be 8:1 to 12.5:1 and I'll grind it out until I make $800 more.

Phase 3 I buy into a game with their $1200 for an even higher stakes
game. The leverage will be 16:1 to 25:1 and I grind it out until I make
$1600 more.

Phase 4 I buy into a game for their $2800 for an even higher stakes
game. The leverage will be 32:1 to 50:1 and I grind it out until I make
$3200 more.

The Poker Tournament is finished!

If you add it up I'll have took $6000 of their money and made it mine.
That is 60% return on my capital for a 4% risk. :)

Something to be clear about is you must start back at phase 1 when your
profit cushion is gone, you complete all the phases, or you are having a
hard time at the current phase and don't feel comfortable.

I above is an example and should be "tweaked" to fit individual styles of
trading.

If you are unclear about the More risk is More risk comment think about
this. I risk 4% of my capital which is about 80 to 100 pips to make 80 to
100 pips in phase 1. From phase 2 on I risk 0% of my capital to make the
additional 56%. :idea:


I think I'm a tad confused about the risk portions. Below is the thought process in my head - where am I going wrong?

P1 - risk 4% ($400) to make $400 in 80-100 pips. Once made, close trade.

P2 - risk 8% (really 4% is original capital, 4% is profit) to make $800 in 80-100 pips. Once made, close trade.

P3 - risk 16% ( 4% original capital, 12% profit) to make $1600 in 80-100 pips. Once made, close trade.

P4 - risk 32% ( 4% original capital, 28% profit) to make $3200 in 80-100 pips. Once made, close trade.

Because you are increasing leverage and your stops/targets are the same amount, is the only thing changing your entry size? And in that case, isn't it 4% risk each time of base capital?


So you are a little bit off I think. First thing is that it doesn't have to be
single trades. It can be used with scalping up to swing trading multiple
trades.

Phase 1 is the only phase where I risk my money. You can risk what you
want depending on your trading style. Risk 4% to make 4% or 1% to make
1% etc. It can be over 50 pips or 200 pips whatever.

Phase 2 I risk my "profit only" so I'll have 40 to 50 pips to work with trying
to make 80 to 100 pips.

The thing is it can be tweaked many different ways depending on comfort
level and trading style. The whole process is used to limit risking my
money and use other peoples money to take the risks.

Another reason it is used would be to push my wins. If you have ever
read Phantom of the Pits that would make more sense.

Unless you are a superstar trader like es/pip risking 1% = 5 pips each and
every trade with 90% accuracy then you need to figure out how to put less
of your capital at risk and push your wins.

At least in my mind I have it set-up to when I trade bad I risk the least
amount. When I am trading well I am risking larger amounts of other
people's money and none of mine. :)

So to recap with the basic formula:
P1 I risk x% of my base capital to make x%
P2 I risk only the profit I made in P1 (increase lot size)
P3 I risk only the profit I made in P1 and P2 (increase lot size more)
P4 I risk only the profit I made in P1,P2, and P3 (increase lot size more)
Go back to P1 recalculate with new account size.


lol

i wish
Bend over and assume the position for another 4 years of hope and change.

cwn6161
rank: 150+ posts
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Posts: 276
Joined: Sun Feb 28, 2010 8:05 pm
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Gender: None specified

Re: Money Management for Short Term Trading

Postby cwn6161 » Sat Oct 30, 2010 3:03 pm

aliassmith wrote:
cwn6161 wrote:
aliassmith wrote:I have been lurking around since my last post and "grinding it out" in the
trenches. :)

I believe I have something note worthy to share and give back to the
Kreslik community where I have been given so much.

A lot of the MightyOne posts rattle around in my head, over and over. I
have thought countless hours on his info. The parts about poker and
his last order adding process for long term trading stuck with me the
most.

The thing is I don't trade long term charts, but I know that MightyOne's
lessons can be adapted to short term trading. So I will share my adaptation
for those of us that are not "power traders" and willing to risk it all on
a single roll of the dice.

More Risk is More Risk
I remember this but didn't understand it for awhile. I did finally get the
meaning behind MightyOne's encrypted lesson. You will see as I move on
what it means.

I now envision trading as a poker game that has players available at any
level of play you desire. All the players sit at the virtual table of forex and
battle it out hand after hand and day after day. Each player having his own
style of play to create an edge.

So my poker roll is $10,000US and if I lose it I'll have to go make
deliveries to get a new roll like the guy in the movie Rounders. Now
who wants to do that? The focus is survival and profitability.

Phase 1 I buy into a game with $400 (4%). I get into a small stakes game
using 4:1 to 6.25:1 leverage and grind it out until I make $400 in profit.
What did I just do there? I took their money. So now I use their money
to take even more of their money.

Phase 2 I buy into a game with their $400 and get into a little higher stakes
game. My leverage will be 8:1 to 12.5:1 and I'll grind it out until I make $800 more.

Phase 3 I buy into a game with their $1200 for an even higher stakes
game. The leverage will be 16:1 to 25:1 and I grind it out until I make
$1600 more.

Phase 4 I buy into a game for their $2800 for an even higher stakes
game. The leverage will be 32:1 to 50:1 and I grind it out until I make
$3200 more.

The Poker Tournament is finished!

If you add it up I'll have took $6000 of their money and made it mine.
That is 60% return on my capital for a 4% risk. :)

Something to be clear about is you must start back at phase 1 when your
profit cushion is gone, you complete all the phases, or you are having a
hard time at the current phase and don't feel comfortable.

I above is an example and should be "tweaked" to fit individual styles of
trading.

If you are unclear about the More risk is More risk comment think about
this. I risk 4% of my capital which is about 80 to 100 pips to make 80 to
100 pips in phase 1. From phase 2 on I risk 0% of my capital to make the
additional 56%. :idea:


I think I'm a tad confused about the risk portions. Below is the thought process in my head - where am I going wrong?

P1 - risk 4% ($400) to make $400 in 80-100 pips. Once made, close trade.

P2 - risk 8% (really 4% is original capital, 4% is profit) to make $800 in 80-100 pips. Once made, close trade.

P3 - risk 16% ( 4% original capital, 12% profit) to make $1600 in 80-100 pips. Once made, close trade.

P4 - risk 32% ( 4% original capital, 28% profit) to make $3200 in 80-100 pips. Once made, close trade.

Because you are increasing leverage and your stops/targets are the same amount, is the only thing changing your entry size? And in that case, isn't it 4% risk each time of base capital?


So you are a little bit off I think. First thing is that it doesn't have to be
single trades. It can be used with scalping up to swing trading multiple
trades.

Phase 1 is the only phase where I risk my money. You can risk what you
want depending on your trading style. Risk 4% to make 4% or 1% to make
1% etc. It can be over 50 pips or 200 pips whatever.

Phase 2 I risk my "profit only" so I'll have 40 to 50 pips to work with trying
to make 80 to 100 pips.

The thing is it can be tweaked many different ways depending on comfort
level and trading style. The whole process is used to limit risking my
money and use other peoples money to take the risks.

Another reason it is used would be to push my wins. If you have ever
read Phantom of the Pits that would make more sense.

Unless you are a superstar trader like es/pip risking 1% = 5 pips each and
every trade with 90% accuracy then you need to figure out how to put less
of your capital at risk and push your wins.

At least in my mind I have it set-up to when I trade bad I risk the least
amount. When I am trading well I am risking larger amounts of other
people's money and none of mine. :)

So to recap with the basic formula:
P1 I risk x% of my base capital to make x%
P2 I risk only the profit I made in P1 (increase lot size)
P3 I risk only the profit I made in P1 and P2 (increase lot size more)
P4 I risk only the profit I made in P1,P2, and P3 (increase lot size more)
Go back to P1 recalculate with new account size.



Yeah, that makes sense. To be honest the idea kinda scares me, because I have to get 4 wins in a row to take the profit. On the other hand I'm only risking my money on one trade, so why not push hard with someone else's?

I could also work with half the profit I make on each trade and save the other half, that way if the last trade goes south I have something remaining.

aliassmith
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Re: Money Management for Short Term Trading

Postby aliassmith » Sat Oct 30, 2010 4:54 pm

es/pip wrote:
aliassmith wrote:
cwn6161 wrote:
aliassmith wrote:I have been lurking around since my last post and "grinding it out" in the
trenches. :)

I believe I have something note worthy to share and give back to the
Kreslik community where I have been given so much.

A lot of the MightyOne posts rattle around in my head, over and over. I
have thought countless hours on his info. The parts about poker and
his last order adding process for long term trading stuck with me the
most.

The thing is I don't trade long term charts, but I know that MightyOne's
lessons can be adapted to short term trading. So I will share my adaptation
for those of us that are not "power traders" and willing to risk it all on
a single roll of the dice.

More Risk is More Risk
I remember this but didn't understand it for awhile. I did finally get the
meaning behind MightyOne's encrypted lesson. You will see as I move on
what it means.

I now envision trading as a poker game that has players available at any
level of play you desire. All the players sit at the virtual table of forex and
battle it out hand after hand and day after day. Each player having his own
style of play to create an edge.

So my poker roll is $10,000US and if I lose it I'll have to go make
deliveries to get a new roll like the guy in the movie Rounders. Now
who wants to do that? The focus is survival and profitability.

Phase 1 I buy into a game with $400 (4%). I get into a small stakes game
using 4:1 to 6.25:1 leverage and grind it out until I make $400 in profit.
What did I just do there? I took their money. So now I use their money
to take even more of their money.

Phase 2 I buy into a game with their $400 and get into a little higher stakes
game. My leverage will be 8:1 to 12.5:1 and I'll grind it out until I make $800 more.

Phase 3 I buy into a game with their $1200 for an even higher stakes
game. The leverage will be 16:1 to 25:1 and I grind it out until I make
$1600 more.

Phase 4 I buy into a game for their $2800 for an even higher stakes
game. The leverage will be 32:1 to 50:1 and I grind it out until I make
$3200 more.

The Poker Tournament is finished!

If you add it up I'll have took $6000 of their money and made it mine.
That is 60% return on my capital for a 4% risk. :)

Something to be clear about is you must start back at phase 1 when your
profit cushion is gone, you complete all the phases, or you are having a
hard time at the current phase and don't feel comfortable.

I above is an example and should be "tweaked" to fit individual styles of
trading.

If you are unclear about the More risk is More risk comment think about
this. I risk 4% of my capital which is about 80 to 100 pips to make 80 to
100 pips in phase 1. From phase 2 on I risk 0% of my capital to make the
additional 56%. :idea:


I think I'm a tad confused about the risk portions. Below is the thought process in my head - where am I going wrong?

P1 - risk 4% ($400) to make $400 in 80-100 pips. Once made, close trade.

P2 - risk 8% (really 4% is original capital, 4% is profit) to make $800 in 80-100 pips. Once made, close trade.

P3 - risk 16% ( 4% original capital, 12% profit) to make $1600 in 80-100 pips. Once made, close trade.

P4 - risk 32% ( 4% original capital, 28% profit) to make $3200 in 80-100 pips. Once made, close trade.

Because you are increasing leverage and your stops/targets are the same amount, is the only thing changing your entry size? And in that case, isn't it 4% risk each time of base capital?


So you are a little bit off I think. First thing is that it doesn't have to be
single trades. It can be used with scalping up to swing trading multiple
trades.

Phase 1 is the only phase where I risk my money. You can risk what you
want depending on your trading style. Risk 4% to make 4% or 1% to make
1% etc. It can be over 50 pips or 200 pips whatever.

Phase 2 I risk my "profit only" so I'll have 40 to 50 pips to work with trying
to make 80 to 100 pips.

The thing is it can be tweaked many different ways depending on comfort
level and trading style. The whole process is used to limit risking my
money and use other peoples money to take the risks.

Another reason it is used would be to push my wins. If you have ever
read Phantom of the Pits that would make more sense.

Unless you are a superstar trader like es/pip risking 1% = 5 pips each and
every trade with 90% accuracy then you need to figure out how to put less
of your capital at risk and push your wins.

At least in my mind I have it set-up to when I trade bad I risk the least
amount. When I am trading well I am risking larger amounts of other
people's money and none of mine. :)

So to recap with the basic formula:
P1 I risk x% of my base capital to make x%
P2 I risk only the profit I made in P1 (increase lot size)
P3 I risk only the profit I made in P1 and P2 (increase lot size more)
P4 I risk only the profit I made in P1,P2, and P3 (increase lot size more)
Go back to P1 recalculate with new account size.


lol

i wish


Blah! Don't be so modest 8)
Trade Your Way as Long as It Makes Money!

aliassmith
rank: 1000+ posts
rank: 1000+ posts
Posts: 1667
Joined: Tue Jul 28, 2009 9:50 pm
Reputation: 21
Gender: Male

Re: Money Management for Short Term Trading

Postby aliassmith » Sat Oct 30, 2010 5:55 pm

cwn6161 wrote:
aliassmith wrote:
cwn6161 wrote:
aliassmith wrote:I have been lurking around since my last post and "grinding it out" in the
trenches. :)

I believe I have something note worthy to share and give back to the
Kreslik community where I have been given so much.

A lot of the MightyOne posts rattle around in my head, over and over. I
have thought countless hours on his info. The parts about poker and
his last order adding process for long term trading stuck with me the
most.

The thing is I don't trade long term charts, but I know that MightyOne's
lessons can be adapted to short term trading. So I will share my adaptation
for those of us that are not "power traders" and willing to risk it all on
a single roll of the dice.

More Risk is More Risk
I remember this but didn't understand it for awhile. I did finally get the
meaning behind MightyOne's encrypted lesson. You will see as I move on
what it means.

I now envision trading as a poker game that has players available at any
level of play you desire. All the players sit at the virtual table of forex and
battle it out hand after hand and day after day. Each player having his own
style of play to create an edge.

So my poker roll is $10,000US and if I lose it I'll have to go make
deliveries to get a new roll like the guy in the movie Rounders. Now
who wants to do that? The focus is survival and profitability.

Phase 1 I buy into a game with $400 (4%). I get into a small stakes game
using 4:1 to 6.25:1 leverage and grind it out until I make $400 in profit.
What did I just do there? I took their money. So now I use their money
to take even more of their money.

Phase 2 I buy into a game with their $400 and get into a little higher stakes
game. My leverage will be 8:1 to 12.5:1 and I'll grind it out until I make $800 more.

Phase 3 I buy into a game with their $1200 for an even higher stakes
game. The leverage will be 16:1 to 25:1 and I grind it out until I make
$1600 more.

Phase 4 I buy into a game for their $2800 for an even higher stakes
game. The leverage will be 32:1 to 50:1 and I grind it out until I make
$3200 more.

The Poker Tournament is finished!

If you add it up I'll have took $6000 of their money and made it mine.
That is 60% return on my capital for a 4% risk. :)

Something to be clear about is you must start back at phase 1 when your
profit cushion is gone, you complete all the phases, or you are having a
hard time at the current phase and don't feel comfortable.

I above is an example and should be "tweaked" to fit individual styles of
trading.

If you are unclear about the More risk is More risk comment think about
this. I risk 4% of my capital which is about 80 to 100 pips to make 80 to
100 pips in phase 1. From phase 2 on I risk 0% of my capital to make the
additional 56%. :idea:


I think I'm a tad confused about the risk portions. Below is the thought process in my head - where am I going wrong?

P1 - risk 4% ($400) to make $400 in 80-100 pips. Once made, close trade.

P2 - risk 8% (really 4% is original capital, 4% is profit) to make $800 in 80-100 pips. Once made, close trade.

P3 - risk 16% ( 4% original capital, 12% profit) to make $1600 in 80-100 pips. Once made, close trade.

P4 - risk 32% ( 4% original capital, 28% profit) to make $3200 in 80-100 pips. Once made, close trade.

Because you are increasing leverage and your stops/targets are the same amount, is the only thing changing your entry size? And in that case, isn't it 4% risk each time of base capital?


So you are a little bit off I think. First thing is that it doesn't have to be
single trades. It can be used with scalping up to swing trading multiple
trades.

Phase 1 is the only phase where I risk my money. You can risk what you
want depending on your trading style. Risk 4% to make 4% or 1% to make
1% etc. It can be over 50 pips or 200 pips whatever.

Phase 2 I risk my "profit only" so I'll have 40 to 50 pips to work with trying
to make 80 to 100 pips.

The thing is it can be tweaked many different ways depending on comfort
level and trading style. The whole process is used to limit risking my
money and use other peoples money to take the risks.

Another reason it is used would be to push my wins. If you have ever
read Phantom of the Pits that would make more sense.

Unless you are a superstar trader like es/pip risking 1% = 5 pips each and
every trade with 90% accuracy then you need to figure out how to put less
of your capital at risk and push your wins.

At least in my mind I have it set-up to when I trade bad I risk the least
amount. When I am trading well I am risking larger amounts of other
people's money and none of mine. :)

So to recap with the basic formula:
P1 I risk x% of my base capital to make x%
P2 I risk only the profit I made in P1 (increase lot size)
P3 I risk only the profit I made in P1 and P2 (increase lot size more)
P4 I risk only the profit I made in P1,P2, and P3 (increase lot size more)
Go back to P1 recalculate with new account size.



Yeah, that makes sense. To be honest the idea kinda scares me, because I have to get 4 wins in a row to take the profit. On the other hand I'm only risking my money on one trade, so why not push hard with someone else's?

I could also work with half the profit I make on each trade and save the other half, that way if the last trade goes south I have something remaining.


It doesn't have to be 1 trade per phase. It took me 5 trades to get through
Phase 1 this week. Phase 1 is the toughest because I risk my money. After
I get my profit cushion there is 0% risk to my capital.

The main premise is to "get other people's money" then go for it
more than normal.

I am not a market crusher like MightyOne, es/pip, or dragon33, so I have
to think of ways to risk less and make more. If I have $80,000 and no way
to replenish it , I had better figure out how to keep less of it at risk.

After one loss I am down to $76,800 and risking $3020 and if I make it
through my basic plan I'll be at $122,880 for a 53% ($42,880) gain on my
initial capital.

If I lost Phase 1 two times I would be down to $73,780 and risking $2951.
If I make it through the 4 phases I would be at $118,048 for 47.5%
($38,048) gain on my initial capital.

I did figure it out in excel and it would take 12 -13 consecutive failures
to be down to $50,000 where 1 success would bring me back to BE.

Things to think about!
Trade Your Way as Long as It Makes Money!

cwn6161
rank: 150+ posts
rank: 150+ posts
Posts: 276
Joined: Sun Feb 28, 2010 8:05 pm
Reputation: 0
Gender: None specified

Re: Money Management for Short Term Trading

Postby cwn6161 » Sat Oct 30, 2010 6:58 pm

aliassmith wrote:
cwn6161 wrote:
aliassmith wrote:
cwn6161 wrote:
aliassmith wrote:I have been lurking around since my last post and "grinding it out" in the
trenches. :)

I believe I have something note worthy to share and give back to the
Kreslik community where I have been given so much.

A lot of the MightyOne posts rattle around in my head, over and over. I
have thought countless hours on his info. The parts about poker and
his last order adding process for long term trading stuck with me the
most.

The thing is I don't trade long term charts, but I know that MightyOne's
lessons can be adapted to short term trading. So I will share my adaptation
for those of us that are not "power traders" and willing to risk it all on
a single roll of the dice.

More Risk is More Risk
I remember this but didn't understand it for awhile. I did finally get the
meaning behind MightyOne's encrypted lesson. You will see as I move on
what it means.

I now envision trading as a poker game that has players available at any
level of play you desire. All the players sit at the virtual table of forex and
battle it out hand after hand and day after day. Each player having his own
style of play to create an edge.

So my poker roll is $10,000US and if I lose it I'll have to go make
deliveries to get a new roll like the guy in the movie Rounders. Now
who wants to do that? The focus is survival and profitability.

Phase 1 I buy into a game with $400 (4%). I get into a small stakes game
using 4:1 to 6.25:1 leverage and grind it out until I make $400 in profit.
What did I just do there? I took their money. So now I use their money
to take even more of their money.

Phase 2 I buy into a game with their $400 and get into a little higher stakes
game. My leverage will be 8:1 to 12.5:1 and I'll grind it out until I make $800 more.

Phase 3 I buy into a game with their $1200 for an even higher stakes
game. The leverage will be 16:1 to 25:1 and I grind it out until I make
$1600 more.

Phase 4 I buy into a game for their $2800 for an even higher stakes
game. The leverage will be 32:1 to 50:1 and I grind it out until I make
$3200 more.

The Poker Tournament is finished!

If you add it up I'll have took $6000 of their money and made it mine.
That is 60% return on my capital for a 4% risk. :)

Something to be clear about is you must start back at phase 1 when your
profit cushion is gone, you complete all the phases, or you are having a
hard time at the current phase and don't feel comfortable.

I above is an example and should be "tweaked" to fit individual styles of
trading.

If you are unclear about the More risk is More risk comment think about
this. I risk 4% of my capital which is about 80 to 100 pips to make 80 to
100 pips in phase 1. From phase 2 on I risk 0% of my capital to make the
additional 56%. :idea:


I think I'm a tad confused about the risk portions. Below is the thought process in my head - where am I going wrong?

P1 - risk 4% ($400) to make $400 in 80-100 pips. Once made, close trade.

P2 - risk 8% (really 4% is original capital, 4% is profit) to make $800 in 80-100 pips. Once made, close trade.

P3 - risk 16% ( 4% original capital, 12% profit) to make $1600 in 80-100 pips. Once made, close trade.

P4 - risk 32% ( 4% original capital, 28% profit) to make $3200 in 80-100 pips. Once made, close trade.

Because you are increasing leverage and your stops/targets are the same amount, is the only thing changing your entry size? And in that case, isn't it 4% risk each time of base capital?


So you are a little bit off I think. First thing is that it doesn't have to be
single trades. It can be used with scalping up to swing trading multiple
trades.

Phase 1 is the only phase where I risk my money. You can risk what you
want depending on your trading style. Risk 4% to make 4% or 1% to make
1% etc. It can be over 50 pips or 200 pips whatever.

Phase 2 I risk my "profit only" so I'll have 40 to 50 pips to work with trying
to make 80 to 100 pips.

The thing is it can be tweaked many different ways depending on comfort
level and trading style. The whole process is used to limit risking my
money and use other peoples money to take the risks.

Another reason it is used would be to push my wins. If you have ever
read Phantom of the Pits that would make more sense.

Unless you are a superstar trader like es/pip risking 1% = 5 pips each and
every trade with 90% accuracy then you need to figure out how to put less
of your capital at risk and push your wins.

At least in my mind I have it set-up to when I trade bad I risk the least
amount. When I am trading well I am risking larger amounts of other
people's money and none of mine. :)

So to recap with the basic formula:
P1 I risk x% of my base capital to make x%
P2 I risk only the profit I made in P1 (increase lot size)
P3 I risk only the profit I made in P1 and P2 (increase lot size more)
P4 I risk only the profit I made in P1,P2, and P3 (increase lot size more)
Go back to P1 recalculate with new account size.



Yeah, that makes sense. To be honest the idea kinda scares me, because I have to get 4 wins in a row to take the profit. On the other hand I'm only risking my money on one trade, so why not push hard with someone else's?

I could also work with half the profit I make on each trade and save the other half, that way if the last trade goes south I have something remaining.


It doesn't have to be 1 trade per phase. It took me 5 trades to get through
Phase 1 this week. Phase 1 is the toughest because I risk my money. After
I get my profit cushion there is 0% risk to my capital.

The main premise is to "get other people's money" then go for it
more than normal.

I am not a market crusher like MightyOne, es/pip, or dragon33, so I have
to think of ways to risk less and make more. If I have $80,000 and no way
to replenish it , I had better figure out how to keep less of it at risk.

After one loss I am down to $76,800 and risking $3020 and if I make it
through my basic plan I'll be at $122,880 for a 53% ($42,880) gain on my
initial capital.

If I lost Phase 1 two times I would be down to $73,780 and risking $2951.
If I make it through the 4 phases I would be at $118,048 for 47.5%
($38,048) gain on my initial capital.

I did figure it out in excel and it would take 12 -13 consecutive failures
to be down to $50,000 where 1 success would bring me back to BE.

Things to think about!


That's what I'm trying to figure out now. How to push harder when I've got someone else's cash.

I'm starting with $500, and I long for the day when I can make trades the size that you do. I feel like I've got something that can work, but I was definitely missing a part where I really pushed hard to make other's cash work for me.

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