How I Look at Money Management

September 13th, 2010

As I’ve increased my trading size over the years, I’ve thought more about money management and the best way to approach it. You can make money management as complicated an issue as you want to, but as with most aspects of trading, simpler is often better.

As I decide how much to increase my trading size, the main question I ask myself is:

How much am I willing to lose in a single day?

That’s really what it boils down to. You are going to have to tolerate big down days to have the big up days so the question really is how much heat are you able and willing to bear to ensure that you catch the profitable days?

If you don’t have a good idea about how much it’s possible for you to lose in whatever timeframe you’re trading in, then you should probably do a little more research until you have that answer. That’s because one day you will lose that much money (and maybe more with slippage) and when the next trade comes along it’s easy to second guess yourself and screw something up.

Crazy Trade in GW Yesterday

December 23rd, 2008

I took one manual trade in GW yesterday. It was gapping down and printed a nice inverted hammer on the 2nd 10 minute bar. It looked like it was on its way until 10:28AM or so. Luckily I was stopped out before trading was halted for over two hours. Apparently someone found out some news that initially the company had no idea about. They initially put out a release that said they had no idea why the stock price dropped. A little later they fessed up.

This is only the second stock I’ve been in where trading has been halted in over 2.5 years of trading this particular style. The previous one turned out really well. Here’s the chart:

Ran Automated Trading Robot Unattended For First Time

August 7th, 2008

I had to run an errand yesterday right at the open, so I couldn’t be in front of my trading screen until 10:30AM ET or so. In my manual trading days, of course, this would have meant a wasted opportunity. Instead, I prepared the automated trading robot and enabled the four strategies I’m trading and went about my business.

When I returned the robot had traded several times and made about 10R without me lifting a finger or even keeping watch. I’ve let the robot run unattended during lunch several times before, but this was the first time I’ve let it trade the open where most of the action is.

The robot does have the ability to send the trades it makes via email alerts, so you could have them sent to your mobile phone or BlackBerry. I turned this feature off though – I didn’t want to have to wonder how each trade was going while I was away.

As I’ve mentioned here in the past, there are so many benefits to automated trading but the ability to have your computer trade normally while you go do something else ranks right up there at the top. What a great feeling!

Summer Doldrums Have Arrived?

May 28th, 2008

I twittered yesterday that there was nothing on my trading radar. I did find something to trade that ended up stopping out with some slippage. It was NGAS and it seemed to run out of, well, gas. It was late in the day for me, so I probably should have passed. There was very little on the screen at all yesterday.

The automated trading has been in a little slump the last couple days as well. It’s given back some of it’s gains from this month.

I’ll be taking today off for some family stuff. Hope everyone has a great one!

Here’s the chart of NGAS:


Charts automatically generated using StockTickr

Slow Day: ATS +1R, Manual +0.23R

May 20th, 2008

Unlike OONR7, I didn’t have a lot on my watchlist today. My automated trading system pulled in 1R and I’m still slowly increasing size there. I’ve also tested a new automated strategy that I tested the waters with today. I’ll put it to work tomorrow again and see what the fills are like. It has tested really well and unlike some previous automated strategies I’ve traded slippage shouldn’t be too big of a factor with it. Only time will tell, though.

I traded CNTF short today which didn’t do much. Hopefully everyone made a killing out there today.

Increasing Risk with Automated Trading +4R, Manual Trading -2R

May 19th, 2008

Today was a tough day – just glance at a chart of the Qs and you’ll see why:

I lost a couple R on my manual trades, but my automated trades made +4R. I’ll be increasing my risk on the automated trades slightly. I’ve also got a couple more strategies that I’m honing and will start putting to the test in the market soon.

Here are the two losing trades from my manual system which I’m sure you’re excited to see.



Charts automatically generated by StockTickr

Automated Trades +7R, Manual -2R

May 12th, 2008

The automated trading did the heavy lifting today. One strategy is definitely rising above the others in my shotgun approach. I’m still trading much smaller in my automated trades, but over time I’ll be adding more and more size as I get more comfortable.

I’m still unsure as to whether my auto-trading will surpass my manual trades as far as income goes, but right now I’m quite optimistic on both fronts.

Good Couple Days, Automated Trading Coming Along

May 7th, 2008

I mentioned last week my automated trading approach – the ol’ throw a bunch of strategies at the wall and see what sticks. So far so good. Yesterday one of my strategies made about 5R, today it lost an R or two.

The manual trades have started off slowly this month but have picked up steam over the past couple days. No time to post charts.

Hope you guys had a great day!

By the way, there is a bunch of new StockTickr stuff coming out soon on many fronts. Exciting stuff! Stay tuned.

Boring Start To Month, Progress on Automated Trading

May 1st, 2008

It seemed like there was a ton of candidates today but very few setups. I made 3 trades, 1 worked out (HOLX). I also felt like I made some headway on the automated trading front. I’ve been throwing a bunch of strategies at the wall and seeing which ones stick. There are a couple that seem to be rising to the top. We’ll see!

Also, it’s rare that I look at the daily chart of the Qs, but I happened to glance at it today. It’s looking pretty good – spitting distance from breakeven for the year it seems:


Here are my trades for the day.



Charts automatically generated by StockTickr

Couple R To Finish April, ATS Trades Slipped Up

April 30th, 2008

It took almost all day for the trades I took to finally turn profitable, but it happened in the late afternoon. I ended the day up a couple R for my discretionary trades. My automated trades are getting slammed by slippage. I’m not going back to the drawing board yet, but I’ll need to take a closer look at some of these trades.

I finished up April up 32R for my discretionary trades and down some for my automated trades. Overall, my best month ever by far.

Here’s some trades I took today:





Charts generated automatically by StockTickr

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