Money management Ideas?

While I'm watching the "paint dry" on this S&P market I thought I'd find out what most of you do regarding Money Management under the conditions I describe.
Lets suppose the following and we'll also say this is all hypothetical so there are no "issues":

1)You are short from 1444.50 with eight contracts and you initially risked 2 points. Total risk is 16 points initially.

2)You take 4 off at 1442.50 and move your stop to breakeven on the remaining 4 which we will call "Runners". For those who don't know this term, I use it because I am planning on having these remaining contracts "run" to further targets.

3)You take 2 more off at 1440.50 ( which was twice your initial per conract risk ). Ok at this point you have made back all of your initial risk. Would most now put their stops at 42.50 on the last two contracts?

4)I will admit there are probably better ways to manage the first 6 contracts and I'm open to ideas but lets "talk" for a minute about the ramianing two contracts. Would most trail their stops so you are always risking the same amount of equity to your target? In other words if I am 2 points away from my target would you place your stop 2 points back? When I get to within one point of my target would you keep your stop one point away to keep the risk to reward even or would you make it even tighter?

I've actually struggled with this for quite some time as it seems to be a big trade off between giving the market some "wiggle" room and keeping a decent risk to reward. Perhaps it would be better to just take all of them off when there is a two point target and not have to think about "runners" but for me it is sometimes a bit painful to watch the market go in my favor and not have enough contracts "working" to get to bigger targets.

Hope this is understandable.

Bruce

Most pundits will tell you that money management is the most important aspect of trading. I agree with one caveat. That you have a statistical advantage in your trading setups. Lacking that, the best money management will do for you is stem the tide of losses as the negative percentages eventually grind your account to zero (just like casinos do to the players). No money management method will make a statistically negative trading method profitable.

So money management is essential to a trading program that has a positive expectancy. Personally, I trade with tight stops and since I never want to turn a winning trade into a loser, I move my stop to breakeven as soon as I pocket 1 point. That does cause me to miss a few runners but it has also protected profits that would have turned to losses, but I don't look back and regret. After all, the important thing is to make money consistently regardless if the profits are small or large.

If I'm fortunate to catch a runner, I trail the stop using a 5 minute chart with a 21 ema. If the price crosses the 21 ema by 2 ticks, I'm out.

I've been toying around with a modified Martingale for the ES. This is predicated on (1) being well-capitalized; (2) having a positive expectancy in setups; and (3) not having a large string of losers.

Assumptions: (1) trade 5 contracts; (2) risk/reward is 1:1; and (3) the exit target is 1 point. Trade 5 contracts until you have 1 loser. After the first loser, the next trade is 6 contacts. If you win that trade, drop back to 5. If you lose that trade, the next trade is 7 and if you lose that then 8. In other words, after each loser, you increase the contract size by 1 contract. Anytime you win a trade, you REDUCE the contract size by 1 contact until you get back to 5 contracts, at which point you are done trading. Of course, you can stop trading anytime you have a profit even though you may be trading more than 5 contracts.

This money management system will help you cut your losses as opposed to keeping each trade at 5 contracts regardless if you lost.

For this system to work, you have to either beat the market or trade it close to even. The problem with this system is that if you have bad luck or make bad decisions, your contracts will spiral up, to where you are trading more contracts than you might be comfortable with.

So with this system there is a final rule: Before you start trading, you must set in your mind a given maximum number of contracts you'll trade. When you reach that level, you must declare yourself a loser and quit.

Hi,
I suggest getting all out with profit equal to stop.

It won't run unless it begins to trend. The challenge then is to work on a way to get back in on the trend with runners.

John

Using a Martingale system or any modification of it for money management often works in the short run but it is usually just a matter of time before it blows up. In Smarter Trading by Perry Kaufman he explains the odds of unusual events happening and it is basically proportional to your trading career. The longer you are in the market as a trader the more likely you are to experience an event that is "unusual." In this case, using the Martingale System (or a modification) will mean that you eventually get wiped out of the market. So it may work for 1 month or 1 year or 3 or 4 or 10 years but eventually it will come back and bite you.

If you have a strategy that makes 2 points on winners and loses 2 points of losers and wins 60% of the time then money management is a very simple concept. You have already developed an edge through back testing and you just have to make sure that 6 out of 10 trades win and then it's a matter of not making mistakes and coming to work each day and being there for when the set-up happens.

Nobody had mentioned scaling in to a trades?

day trader, I saw a post where you mentioned you use Ninja Traders Platform. Could you tell me it reliable to trade multiply of orders? such as scaling in and moving stops to even after the first add and so on..The reason I ask is, I have read some mixed reviews when using the autotradesaying it is not very reliable, could you tell me your experience with it please.

Cheers

Bill

Ninja Trader has never failed when I've used it and has always worked as expected when trailing stops and scaling in and out of positions.

Have a look at the date of the reports that you read and see which version of Ninja Trader it relates to. I know that Ninja is now in version 6 and gone through many changes and revisions and may well have issued bug fixes for problems that have happened in the past.

You have to remember that all software, especially complex software like trading platforms, will have bugs and my experience with reporting bugs to Ninja is that they get fixed very quickly and a new release comes out frequently.

Thanks for the quik reply

I was refering to the reviews made by elite trader http://www.elitetrader.com/so/?action=view&SR_ProductID=92

I am very tempted to give them a go, even more so, after what you have said. If I go for Ninja trade it will be powered by patsystems from by broker not sure who you use to power it day trader?

I also heard somewhere, the Ninja trader try's to figure your system out and sell it on..I AM SURE THIS CANT BE TRUE?

Great site by the way.

Bill

Those 2 reviews from this year aren't very good but I haven't had that experience. I connect to Spike Trading Services which is powered by PatSystems so probably very similar to what you're using.

I have never heard that Ninja try and figure out your system and sell it on. I think that trying to figure out somebody's system is way more difficult than developing your own system so I would be very surprised if that was the case. Where did you hear that?

Thanks for the info day trader, I heard it, guess where, Elite Trader lol....hard to believe what some people say on there. Anyway, I will look in to ninja trader and see how it goes and report back here.

Thanks Bill

Very Intersting TraderBrian.

I'm trying not to set any stops, but determine the mkt direction for the week...5-7 trading days....at sell at at the high or close to the high and buy close to the low...and wait for it to hit the weekly pivot.

This week both ES and ER opened to close to weekly pivot. I like to see a variance of 8-12 pts...the more the better....as the weekly pivot will be hit.