NexusFi: Find Your Edge


Home Menu

 





Big time frames with small account


Discussion in Psychology and Money Management

Updated
      Top Posters
    1. looks_one Morainer with 5 posts (0 thanks)
    2. looks_two Big Mike with 1 posts (0 thanks)
    3. looks_3 sunny2010 with 1 posts (3 thanks)
    4. looks_4 RM99 with 1 posts (2 thanks)
    1. trending_up 4,059 views
    2. thumb_up 7 thanks given
    3. group 6 followers
    1. forum 10 posts
    2. attach_file 0 attachments




 
Search this Thread

Big time frames with small account

  #1 (permalink)
Morainer
Zagreb
 
Posts: 5 since Apr 2011
Thanks Given: 9
Thanks Received: 0

Guys I'm having problem with understanding the risk management.

The general rule of thumb is that we should risk 1-3% with every trade. Thats fine. But the problem is, how do you guys determine s/l on daily entries, since ATR can go to around 100ticks (futures) depending on the volatility, so that would mean that i need to have 100k account approx. to trade on daily charts?

I am still a noob and still practicing demo account, but when i start, my account will not be bigger than 5k, and i have no means of making it bigger. Thats why i am trying to cope with small time frames, with going up to 5% as the biggest risk.

Ps

Big thank you to Mike and the rest of you wonderful people who have contributed to creating this amasing forum.

Reply With Quote

Can you help answer these questions
from other members on NexusFi?
Ninja Mobile Trader VPS (ninjamobiletrader.com)
Trading Reviews and Vendors
NT7 Indicator Script Troubleshooting - Camarilla Pivots
NinjaTrader
Better Renko Gaps
The Elite Circle
The space time continuum and the dynamics of a financial …
Emini and Emicro Index
Futures True Range Report
The Elite Circle
 
  #3 (permalink)
 RM99 
Austin, TX
 
Experience: Advanced
Platform: TradeStation
Trading: Futures
Posts: 839 since Mar 2011
Thanks Given: 124
Thanks Received: 704



Morainer View Post
Guys I'm having problem with understanding the risk management.

The general rule of thumb is that we should risk 1-3% with every trade. Thats fine. But the problem is, how do you guys determine s/l on daily entries, since ATR can go to around 100ticks (futures) depending on the volatility, so that would mean that i need to have 100k account approx. to trade on daily charts?

I am still a noob and still practicing demo account, but when i start, my account will not be bigger than 5k, and i have no means of making it bigger. Thats why i am trying to cope with small time frames, with going up to 5% as the biggest risk.

Ps

Big thank you to Mike and the rest of you wonderful people who have contributed to creating this amasing forum.

I think you're making the mistake of setting your risk tolerance before evaluating your strategy performance.

Risk tolerance is mainly determined by strategy performance, namely drawdown.

If you test/sim for 6 months and you observe a drawdown of 20% (account balance), then you must start with enough capital to weather 20% (and some factor of safety....the old saying is that you're largest drawdown is still yet to come).

Having said that, if you're trading a fixed/discrete instrument (like futures contracts) and say you're trading the E-mini and you need $3500 for one contract (not sure what it is these days).....and you've observed through your paper trading and backtesting a drawdown of 20%, that would mean you would need a MINIMUM of $3500+20%) to ensure that if you enter live at the wrong time, you won't get drawndown and knocked out of the minimum margin requirement for that instrument.

If you're trading a more continous/liquid instrument (like stocks) and you observe a drawdown of 20% trading one share, then your money management should feature a strategy that incorporates a position size less than something that would draw you down below your account min.

Obviously, with either, you have to anticipate share float/slippage and commission burden and adjust your position sizes accordingly.

In the end, I'll say that the number one commonality among losing traders (in the research I've seen) is undercapitalization.....or in other words, they were trying for profits greater than their account could handle. In essence, if you observe that the most trades you lose over a given period (and negative equity) is $5000, and you have a $5k account, then you're really pushing the envelope and succeptible to outlier performance periods.

Reply With Quote
Thanked by:
  #4 (permalink)
Morainer
Zagreb
 
Posts: 5 since Apr 2011
Thanks Given: 9
Thanks Received: 0

Excellent post, thank you.

I do actually have some of these factors incalculated in my trading plan, such as slippage (i've put 1.5 ticks per trade as fixed number for the backtesting of 500vol charts/2min charts), but i prefer having my s/l fixed depending on the current volatility on the chart and general volatility of the instrument. Sure, I micro manage it, but when i say "fixed" i mean the biggest amount of money i am ready to lose per trade. In the context of psychology versus probability, this proved to me to be the best option so far (i am of course flexible if i learn better) in backtesting and demo live trading-presently i am more focused on practicing PA. Theres also the thing with margin i get with Mirus futures (i'm still demoing though)-prices of contract are from 500-1000 dollars for intraday trading.

I will also put in the calculations for max. drawdown as you recommend. 20% is really big drawdown, that would mean I would need to lose 7-10x in a row. that hasn't happened to me yet though, nevertheless, i am sure live trading changes everything

Reply With Quote
  #5 (permalink)
sunny2010
london
 
Posts: 10 since Oct 2010
Thanks Given: 0
Thanks Received: 6

Hi

From my experience

1. Begin Small - With brokers who offer a small $ / pip
2. Try your strategy - including testing chart parameters - It does not matter how you trade - indicator based, price action based, fundamental based
3. Test your emotions - to your Losses & profits.

Then - You will arrive at a "Risk Parameter" that suits you.

Risk , remember is based on "your" Emotionaltolerance.
Risk , remember is based on "your" Strategy Tolerance

Hope this helps you.

Practice....practice.......practice

Reply With Quote
Thanked by:
  #6 (permalink)
Morainer
Zagreb
 
Posts: 5 since Apr 2011
Thanks Given: 9
Thanks Received: 0

Thanks for the reply. Anything helps

I am in the proces finding what suits me...so far, heading in the direction of being very picky about choosing trades, in other words, finding only high prob setups.

Reply With Quote
  #7 (permalink)
 dutchbookmaker 
NYC
 
Posts: 187 since Dec 2010

You should look into trading the index ETFs. When people talk about trading small accounts they are basically never talking about holding over night with futures.

Reply With Quote
  #8 (permalink)
Morainer
Zagreb
 
Posts: 5 since Apr 2011
Thanks Given: 9
Thanks Received: 0


dutchbookmaker View Post
You should look into trading the index ETFs. When people talk about trading small accounts they are basically never talking about holding over night with futures.

Tnx.

I already looked into ETFs. they were my first instrument when i started learning about trading.

oh and i dont plan to hold overnight, i am only interested in intraday for now.

cheers

Reply With Quote
  #9 (permalink)
 
Big Mike's Avatar
 Big Mike 
Manta, Ecuador
Site Administrator
Developer
Swing Trader
 
Experience: Advanced
Platform: Custom solution
Broker: IBKR
Trading: Stocks & Futures
Frequency: Every few days
Duration: Weeks
Posts: 50,399 since Jun 2009
Thanks Given: 33,175
Thanks Received: 101,541

 
Thread Moved


Moved to Money Management



When creating a new thread, note which subforum you are in. Here is a short list of suggestions:

- Topic: Anything to do with an Elite indicator -> Subforum: The Elite Circle
- Topic: Looking for an existing indicator, or how-to use an indicator -> Subforum: (the platform)
- Topic: Programmer needing help with non-Elite indicator -> Subforum: (the platform) - Programming
- Topic: Want an indicator created/modified -> Reply to "Want indicator created free" in Elite Circle
- Topic: Vendors (trading rooms, commercial indicators) -> Subforum: Vendors/Product Reviews
- Topic: Discussion of Forex or Currency trading -> Subforum: Forex and Currency Trading
- Topic: Journals of your trading -> Subforum: Trading Journals or Elite Trading Journals
- Topic: General trading related discussions -> Subforum: Traders Hideout
- Topic: Discussion of a trading method -> Subforum: Traders Hideout
- Topic: Automated Trading -> Subforum: Elite Automated Trading

Last, any Elite Member may create more or less any of these topics in The Elite Circle at your own discretion (your support is appreciated).

This is just a short general list and doesn't cover everything. If you are unsure where to create your new thread, just create it in Traders Hideout and a moderator will move it if necessary.

-- Big Mike Trading



Mike

We're here to help: just ask the community or contact our Help Desk

Quick Links: Change your Username or Register as a Vendor
Searching for trading reviews? Review this list
Lifetime Elite Membership: Sign-up for only $149 USD
Exclusive money saving offers from our Site Sponsors: Browse Offers
Report problems with the site: Using the NexusFi changelog thread
Follow me on Twitter Visit my NexusFi Trade Journal Reply With Quote
  #10 (permalink)
 
Massive l's Avatar
 Massive l 
OR/USA
Legendary /NQ Trader
 
Experience: None
Posts: 2,129 since Mar 2011
Thanks Given: 1,859
Thanks Received: 5,106


Small accounts should always use large (Daily) time frames IMO.

You're not going to do much but wipe out your account using smaller time frames, grabbing a few ticks here and there.
It will work until...it doesn't work.

You need to see the bigger picture first, and with a small account, you need to develop
a strategy that has the lowest risk possible.

If you think, tweak, and speak (write) about it enough, you are bound to make headroom.

You don't need to focus on 1%,2%,3%, etc.

You need to focus on the strategy because the strategy will dictate how much you are going to risk.

Visit my NexusFi Trade Journal Reply With Quote
Thanked by:




Last Updated on June 24, 2011


© 2024 NexusFi™, s.a., All Rights Reserved.
Av Ricardo J. Alfaro, Century Tower, Panama City, Panama, Ph: +507 833-9432 (Panama and Intl), +1 888-312-3001 (USA and Canada)
All information is for educational use only and is not investment advice. There is a substantial risk of loss in trading commodity futures, stocks, options and foreign exchange products. Past performance is not indicative of future results.
About Us - Contact Us - Site Rules, Acceptable Use, and Terms and Conditions - Privacy Policy - Downloads - Top
no new posts