The Successful Trader's Guide to Money Management

APPENDIX II

II.1 Understanding the Type of Strategy

The money management approach linked to a portfolio of systems has shown how different models can produce significantly different results. The simple possibility of adopting a different model for the portfolio of systems each time, has also been considered.

While this was logical in the case of a ‘common engine’ system applied to several instruments, it can be a weaker approach if systems with significantly different features are combined.

As usual, a specific example is the best way to illustrate the possible options to handle situations of this kind in a more effective way.

In the previous appendix we traded Eurostox50 futures using an intraday strategy. The conclusions we reached show that, the combination of strategy and position sizing model may even raise doubts about the validity of the basic strategy structure. In the end, we also found that a strategy with a monetary stop‐loss was preferable as, although less effective than a version with just a time stop, it does prove to be more effective once the percent f model is applied.

We'll use this version of the strategy in this appendix, in the hypothesis of using it with another, quite different, strategy.

Despite being applied to Eurostox50 futures, the new strategy won't be based on 60‐minute bar charts but rather 240‐minute charts, and will simply open countertrend trades when a min. or max. period is reached.

The basic code is that shown in Figure AII.1.

If marketposition ...