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Money Management is always a good practice, as you suggest. However, money
management should never be used to trade a system that is not robust. We are
still faced with the question of robustness from 5/21 - 9/19. Suggestion?
Sincerely,
Wes Williams
> -----Original Message-----
> From: 'Lucky Bastard' [mailto:hadrada@xxxxxxxxxxx]
> Sent: Tuesday, February 19, 2002 6:23 PM
> To: omega-list@xxxxxxxxxx
> Subject: Re: Oddball and the Emperor's New Clothes
>
>
> : Can the Oddballer's who marvel at Oddball's beautiful clothes
> answer this
> : elementary question? What happened to the system from 5/21/2000 -
> 9/19/2000?
> : Running 100 @SP contracts against $ADV with parameters 7,3,1 produced a
> loss
> : of $4,500,000 and a debt of $1,100,000. You are ruined. Now before you
> : reply and say "ahh.. that is the problem... you are using the wrong
> : parameters!", may I submit that you do not know the precise
> parameters to
> : use in the future unless your settings are **ROBUST** and yield profits
> (and
> : cut losses quickly) in all kinds of market conditions.
> :
> : Using the "standard" settings may have done well in the past
> and done well
> : since 9/19/2000, but how do you account for 5/21 - 9/19 ?
> :
> : I would really like to know how you plan to survive this period
> if we are
> : at, say, 1/1/2000.
>
> Simple: don't trade 100 contracts. Better yet, don't trade it
> until you run
> a Monte Carlo Simulation to get an idea of what a realistic drawdown might
> be. Then build your account up to the amount needed to trade it with some
> peace of mind.
>
> To trade 100 S&P contracts in 2000, you would have to put up approximately
> 100* 50,000 in margin (I don't remember the exact exchange minimum of that
> time period but I do remember that the margins at my broker's FCM
> was around
> that amount. The maximum the margins for the ND's ever reach was around
> $70,000 per contract in that time period) or $5 million....add in
> the amount
> needed to cover the drawdown calcuated from a MCS, you would need at least
> $150,000 per contract or $15 million. Seen that way, 30% drawdown
> for a raw
> continuous system is not bad. Refine it further, you can reduce
> the drawdown
> to ~10% to 20%.
>
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