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Strategies & Market Trends : Systems, Strategies and Resources for Trading Futures

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To: Tom Trader who wrote (12259)	1/10/1999 6:31:00 PM
From: Chip McVickar	Read Replies (1) of 44573

Tom..... I believe the answer is fairly simple and straight forward. #1--Any single trade at any point is a 50/50 chance of winning - No Less -- No More #2--If you have developed a system that over 10 years produces 55% returns, then you have already determined it's rate of success. To determine exposure for any trade: #1--$50,000 ÷ $2,500 = 20 x 55% = 11 contracts or $27,500 at risk on any single trade #2--As the system produces gains your number of contracts will increase. If the next time you traded your holdings were now $125,000.... $125,000 ÷ $2,500 = 50 x 55% = 27.5 contracts. #3--Money management plays a part in retaining gains and a % of those returns need to be taken out of the account. If your system produced 70% returns: $50,000 ÷ $2,500 = 20 x 70% = 14 contracts Now...if your system can determine between good-bad-superb trades....then one could develope a method of fading the number of contracts for good-gad-superb signals. I don't believe it's much more difficult then this.... #1--If you wanted to be more careful use 45% $50,000 ÷ $2,500 = 20 x 45% = 9 contracts #2--Even more conservative....one would only trade the 5% that was over the 50% success rate in this case 20 x 5% = 1 But this would be hardly worth it. I'll look at this in a few days and see if I still agree >smile< Chip

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