Trading Systems and Money Management : A Guide to Trading and Profiting in Any Market

a random trade to end up a loser, because of the mandatory risk–reward relation- ship of at least 2:1 that you should have in pl ...

age of winning trades? To answer that question, you need to apply the following piece of math to your trading statistics: P(r)  ...

FIGURE 3.1 Matrix indicating likelihood of profitable trades. FIGURE 3.2 Chart indicating likelihood of profitable trades. 39 ...

rectly built system, with a relatively high amount of profitable trades, these num- bers hold very little value and should be lo ...

ers in a row, given a certain amount of trades. Note that we always need two trades or more for the total number of trades to be ...

42 FIGURE 3.5 Chart indicating likelihood of winners and losers. FIGURE 3.6 Relative likelihood of winners and losers. Percent l ...

hood to experience a streak of at least a certain number of winners or losers. For example, the likelihood to experience at leas ...

two signals went short only one day apart from each other. In late October and early November, two signals two days in a row wen ...

you trust your system enough to take the trade this time? Only a complete test of all signals will give you that confidence. The ...

46 PART 1 How to Evaluate a System second signal unanalyzed. (To learn more about this system and its trailing stop version, see ...

CHAPTER 4 Risk Ionce stumbled upon an Internet site dedicated to systems trading and design. The site presented a mailing list, ...

The same goes for the message-posting guy. He probably has a bunch of trad- ing systems with back-tested profit factors around f ...

you are willing to lose in each and every trade, for the possibility of making a prof- it, just as you’re willing to risk a cert ...

bulk of my money analyzing the markets, rather than trading them. And you, I assume, would not have bought this book if you alre ...

that it works equally as well in all markets and market conditions. If you manage to do all this, you will be surprised at how m ...

believed were poised for a four-point move and then bought 1,000 shares of any of those stocks when the move got started. When s ...

placed too far away from the entry price to be reached within a day. Let’s say we use a 2 percent stop, also equal to a 2-point ...

by placing the stop loss even further away from the entry point. However, no mat- ter how good our system is, it is not likely t ...

magic of proper money management (which we address more thoroughly in Chapter 4), and the power of trading several seemingly les ...

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