Money Management Strategies for Futures Traders

ISBN-10: 0471522155

ISBN-13: 9780471522157

Edition: 1992

List price: $115.00 Buy it from $31.74
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Description:

Distills complex theories for the benefit of the average trader with little or no background in finance or mathematics by offering a wide range of valuable, practical strategies for limiting risk, avoiding catastrophic losses and managing the futures portfolio to maximize profits. Numerous topics are explored including: why most traders lose at the futures game most of the time; why most mechanical trading systems are apt to fail; the probabilistic approach to trading; how to make stop-loss orders work for, rather than against you; the pros and cons of options versus futures trading; and how to limit risk through diversification.
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Book details

List price: $115.00
Copyright year: 1992
Publisher: John Wiley & Sons, Incorporated
Publication date: 3/30/1992
Binding: Hardcover
Pages: 288
Size: 6.50" wide x 9.50" long x 1.00" tall
Weight: 1.232
Language: English

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