Search
Category

Special Article Collections

AT Article Name

AT Author

AT Issue

AT Subject

CT Article Name

CT Author

CT Issue

CT Subject

FOT Article Name

FOT Author

FOT Issue

FOT Subject


Links

Questions or problems?

Active Trader Home Page

Michael Harris 0
Facing the facts of risk and money management by Michael Harris
AT-May 2002-10149
The basis of risk control and money management is the relationship between how much you risk per trade and how many consecutive losing trades your strategy might produce. Understanding this relationship will allow you to determine how much capital it will
Price: $4.25

Detailed Description

Traders tend to focus most of their efforts on developing and testing trading strategies, often overlooking the fact that even potentially profitable entry and exit rules may end up losing money because of inappropriate risk and money management.

Moreover, system developers sometimes attempt to weave complicated risk and money management rules into their trading methods, ignoring another, perhaps less understood fact: Such rules must be treated as an integral part of the trading system during back–testing to ensure that historical performance results reflect real trading potential.

A common mistake made by new trading system developers is to attempt to increase or maximize equity growth of a historical test by adding to open positions or increasing a new position size using the system’s profits. Obviously, this works well for a system with positive historical equity growth, but real–life performance can be disastrous if the trading system does not behave as it did in back–testing.
Shopping Cart
Your cart is empty.