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Advanced Money Management


This is only for traders who through back and forward testing know what their system delivers and what it doesn't. This qualifies as agressive, and is a path to total ruin for new traders, so know that going in. Yes I'm mentioning an expected return to a draw down ratio.

If your system delivers 4:1 or even 5:1 for an example, you can utilize your account's total buying capacity to leverage yourself in the quest to add new contracts or diversify your portfolio. Let's face it, your chances are better than the greatest odds in Vegas you'll suffer your first heart attack before adding a second contract adhering to a 1:1 MER and steering clear of your account's buying capacity.

At a 4:1 RDR on a $5000 Account and a 50% MER using this leverage strategy you'ld trade your account as if it were a $30,000 account.

You know the drill, start in small percentages. The subconscious doesn't like change and the ideation of monetary value only serves to hinder a smooth transition in change.
It may be unclear how to trade a one contract, $5000, and 50% MER as if it were a $30,000 account.

Think of it this way: 12.50 a tick times 4 quarter ticks equates to an account that's 200% per point's sum.

A leveraged account of $30,000 would allow you to trade a maximum of any combination of a scaleout or bare trade of 6 contracts. That would be 100% equity risk and six times margin's risk. Insane! But that's what you have to work with.
quote:
Originally posted by SPQR



Think of it this way: 12.50 a tick times 4 quarter ticks equates to an account that's 200% per point's sum.



That should read 10,000% per point's sum. I was automatic typing, or something.