ARTICLE SYNOPSIS ...Money Management Indicators by Michael R. Bryant, Ph.D. Keeping track of your system's performance will alert you to changes in market behavior. T raditional market indicators are typically based on price. Moving averages, for example, are calculated using a specific number of bars of price history. Traditional indicators can be useful for gauging price action in the market, but I wanted indicators to measure how my system was performing. So I tried out a combination of indicators based on the profit/loss stream of a trading system. These money management indicators are plotted on a price c...
ARTICLE SYNOPSIS ...Need to know how much to put on your next trade? You can figure it out with 95% reliability using this simulation technique. Consider this: Jane and Joe started trading the same Standard & Poor's 500 futures trading system at the same time. They each began with $100,000 and both followed the system exactly. But 12 months later, Joe's account was worth $200,000, while Jane's account was worth only $50,000. What was the difference in their trading? Position sizing. As his account equity increased, Joe increased the number of contracts in a near-optimal manner, resulting in a sharp runup in equi...