[TheOptionClub.com] Re: Money Management

 

I feel that I learned a lot from

Van K. Tharp's "Trade Your Way to Financial Freedom"
Josh Lukeman's "The Market Maker's Edge"

They lay out money management in clear terms, and I have been using them to my benefit.

These books deal with stock trading mostly, but the approach to risk works for options spread trading just as well, IMO.

--- In OptionClub@yahoogroups.com, "mcatolico" <mcatolico@...> wrote:
>
> So it is the Kelly formula. I hope the dude gave credit to the person who
> actually invented it. at any rate Kelly is pretty useless unless you have a
> long term demonstrated edge that persists in the same relative magnitude
> over time. Btw the Kelly criterion is designed to optimize your bet size but
> tells you nothing about how to become successful in the first place.
>
>
>
> From: OptionClub@yahoogroups.com [mailto:OptionClub@yahoogroups.com] On
> Behalf Of bullishengulfing
> Sent: Monday, March 01, 2010 1:37 PM
> To: OptionClub@yahoogroups.com
> Subject: [TheOptionClub.com] Re: Money Management
>
>
>
>
>
>
>
>
> This is the optimal f formula as defined by Nauzer J. Balsara in his book
> Money Management Strategies for Futures Traders. f is the optimal fraction
> (percentage) to be risked on one trade, A is the average payoff ratio
> (dollars earned to one dollar lost), and p is the average win ratio
> (probability in percentage of success). It's only one of many ways to
> position size trades.
>

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