Decoding Markets and Marwood Research
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101 Lessons For Aspiring Traders PDF
...on money management
101 LESSONS FOR ASPIRING TRADERS Learn to cut your losses quickly and let your winners run. You need to find the right balance between taking profits and cutting losses. That comes with experience and through patiently working on your strategy. Test different money management systems to see which one suits your strategy best. 11 12 Every few months review your trades and analyse where you could improve. What do the statistics tell you about your win rate, typical risk:reward and position size? Look at the MAE (maximum adverse excursion) and MFE (maximum favorable excursion) of every trade. What does it tell you about where to place stops or profit targets? Use these statistics to fine tune your position size so that it becomes more optimal over time. 13 14 Always consider the possibility of a random, black swan event. You cannot predict a black swan event but it can wipe off years of gains. If using margin, it could put you into debt. That’s another reason why it’s good to diversify and regularly bank gains. Limit your risk on every trade (for example 0.5% of your bankroll) and limit your daily risk too. For example, if you lose more than 2%, turn everything off and come back another day. Sometimes you need to clear your head and not let the money affect your decisions. 15 Be careful about making any assumptions about correlations. Correlations can change over time. During a market panic, correlations can go out of the window and everything can go down together. 101 LESSONS FOR ASPIRING TRADERS You cannot build a trading system without good data. First job is to get the data and the infrastructure right then you can test your ideas. There is no quicker way to go broke than trading a strategy that has been backtested on bad data. Download 1.87 Mb. Do'stlaringiz bilan baham: |
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