MultiStratMM - for maximum profit

[Hip Rob]

Here's a money management idea to make trading profitable - hopefully very profitable.

Just about any strat (strategy) is successful when combined with prudent money management and traded at the right time. i.e trade a trend following strat. when markets are trending, trade a retracement strat. when markets are range bound.

The hard part is identifying the current market conditions and switching strats at the right time which can be at any time (and usually when you least expect it ).

THE SOLUTION:

1. Trade 2 strats simultaneously and use money management to allocate more money to the one that is winning and reduce the risk to the one that is losing. One strat is trend following the other not.
2. Initially each strat is allocated a value for RiskPerTrade1 and RiskPerTrade2 = 0.25%.
3. If the last trade was a winner then increase RiskPerTrade by multiplying it by 1.5
4. If the last trade was a loser then decrease the RiskPerTrade by multiplying it by 0.5.

When market conditions favour one strat it is allocated more risk to maximise the profits. When market conditions are killing a strat it's position size is wound right down to limit the losses.

The beauty of this is that it automatically does what is possibly the hardest and most important thing to get right with live trading.

Of course you would set a minimum and maximum value for RiskPerTrade. Prudent values would be 0.025% and 2.5% when daytrading. A limit on the days and weeks losses is also prudent. The trend is not your friend if your account balance is trending down.

If anyone sees enough merit in this idea to code an EA I hope they send me a copy. I have many more high probability ideas.

This could be duplicated for multiple instruments by scaling down the RiskPerTrade1 dependent on how many symbols were being traded.

steve b 2009 Mar 3rd