Risking Loss to Win

This week’s series of blog articles looks at what some of the World Cup trading contest winners do by way of how much they are willing to lose in order to win.

John Holsinger won the contest in his division in 2002 taking both first and second place. His first place account came in at 608% and his second place account came in at 304%.

He says he used a fixed money management stop loss in his trading during the World Cup contest. That is, if any position he entered lost a fixed amount of money, he would exit that position for the fixed amount of money lost.

He did not say what the exact amount of the fixed stop loss was. My guess is that he used a fraction or multiple of the average daily price range because he says “I had made the decision to use a fixed money management stop loss by examining several series of trades to see how much rope I had to give the market before it hangs itself.”

He says he does use a trailing stop but only after the trade is profitable, not before that time. He says that his analysis has shown that using a trailing stop does not enhance the bottom line nor reduce drawdown. He says a trailing stop only takes pressure off, and that since trading is a mental game a trailing stop is beneficial.

continued tomorrow ...

Copyright 2007 Raymond T. Lee. All rights reserved.
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