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| Understanding the Money Management Process | |
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| Steps in the Money Management Process | |
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| Ranking of Available Opportunities | |
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| Controlling Overall Exposure | |
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| Allocating Risk Capital | |
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| Assessing the Maximum Permissible Loss on a Trade | |
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| The Risk Equation | |
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| Deciding the Number of Contracts to be Traded: Balancing the Risk Equation | |
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| Consequences of Trading an Unbalanced Risk Equation | |
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| Conclusion | |
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| The Dynamics of Ruin | |
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| Inaction | |
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| Incorrect Action | |
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| Assessing the Magnitude of Loss | |
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| The Risk of Ruin | |
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| Simulating the Risk of Ruin | |
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| Conclusion | |
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| Estimating Risk and Reward | |
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| The Importance of Defining Risk | |
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| The Importance of Estimating Reward | |
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| Estimating Risk and Reward on Commonly Observed Patterns | |
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| Head-and-Shoulders Formation | |
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| Double Tops and Bottoms | |
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| Saucers and Rounded Tops and Bottoms | |
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| V-Formations, Spikes, and Island Reversals | |
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| Symmetrical and Right-Angle Triangles | |
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| Wedges | |
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| Flags | |
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| Reward Estimation in the Absence of Measuring Rules | |
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| Synthesizing Risk and Reward | |
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| Conclusion | |
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| Limiting Risk through Diversification | |
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| Measuring the Return on a Futures Trade | |
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| Measuring Risk on Individual Commodities | |
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| Measuring Risk Across Commodities Traded Jointly: The Concept of Correlation Between Commodities | |
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| Why Diversification Works | |
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| Aggregation: The Flip Side to Diversification | |
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| Checking for Significant Correlations Across Commodities | |
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| A Nonstatistical Test of Significance of Correlations | |
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| Matrix for Trading Related Commodities | |
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| Synergistic Trading | |
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| Spread Trading | |
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| Limitations of Diversification | |
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| Conclusion | |
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| Commodity Selection | |
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| Mutually Exclusive versus Independent Opportunities | |
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| The Commodity Selection Process | |
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| The Sharpe Ratio | |
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| Wilder's Commodity Selection Index | |
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| The Price Movement Index | |
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| The Adjusted Payoff Ratio Index | |
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| Conclusion | |
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| Managing Unrealized Profits and Losses | |
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| Drawing the Line on Unrealized Losses | |
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| The Visual Approach to Setting Stops | |
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| Volatility Stops | |
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| Time Stops | |
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| Dollar-Value Money Management Stops | |
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| Analyzing Unrealized Loss Patterns on Profitable Trades | |
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| Bull and Bear Traps | |
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| Avoiding Bull and Bear Traps | |
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| Using Opening Price Behavior Information to Set Protective Stops | |
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| Surviving Locked-Limit Markets | |
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| Managing Unrealized Profits | |
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| Conclusion | |
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| Managing the Bankroll: Controlling Exposure | |
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| |
| Equal Dollar Exposure per Trade | |
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| |
| Fixed Fraction Exposure | |
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| |
| The Optimal Fixed Fraction Using the Modified Kelly System | |
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| |
| Arriving at Trade-Specific Optimal Exposure | |
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| |
| Martingale versus Anti-Martingale Betting Strategies | |
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| |
| Trade-Specific versus Aggregate Exposure | |
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| |
| Conclusion | |
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| Managing the Bankroll: Allocating Capital | |
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| Allocating Risk Capital Across Commodities | |
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| |
| Allocation within the Context of a Single-commodity Portfolio | |
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| |
| Allocation within the Context of a Multi-commodity Portfolio | |
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| |
| Equal-Dollar Risk Capital Allocation | |
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| |
| Optimal Capital Allocation: Enter Modern Portfolio Theory | |
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| |
| Using the Optimal f as a Basis for Allocation | |
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| |
| Linkage Between Risk Capital and Available Capital | |
| |
| |
| Determining the Number of Contracts to be Traded | |
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| |
| The Role of Options in Dealing with Fractional Contracts | |
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| |
| Pyramiding | |
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| |
| Conclusion | |
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| |
| |
| The Role of Mechanical Trading Systems | |
| |
| |
| The Design of Mechanical Trading Systems | |
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| |
| The Role of Mechanical Trading Systems | |
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| |
| Fixed-Parameter Mechanical Systems | |
| |
| |
| Possible Solutions to the Problems of Mechanical Systems | |
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| |
| Conclusion | |
| |
| |
| |
| Back to the Basics | |
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| |
| Avoiding Four-Star Blunders | |
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| |
| The Emotional Aftermath of Loss | |
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| |
| Maintaining Emotional Balance | |
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| |
| Putting It All Together | |
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| Appendix A: Turbo Pascal 4.0 Program to Compute the Risk of Ruin | |
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| |
| Appendix B: BASIC Program to Compute the Risk of Ruin | |
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| |
| Appendix C: Correlation Data for 24 Commodities | |
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| |
| Appendix D: Dollar Risk Tables for 24 Commodities | |
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| |
| Appendix E: Analysis of Opening Prices for 24 Commodities | |
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| |
| Appendix F: Deriving Optimal Portfolio Weights: A Mathematical Statement of the Problem | |
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| |
| Index | |