CASH MANAGEMENT & RISK CONTROL
Our strategy trader is now spending a lot of time using TradeStation to focus on
cash management. He has found a group of indicators that he trusts, has back
tested, and has worked with for enough time now so that he knows their
strengths and weaknesses. He’ll tell you, “I have finally realized that there is no
Holy Grail. There is only so much money in the markets and most indicators can
be rigged to catch most of the moves. The real task is to manage your money
efficiently to take advantage of market moves.”
Our trader is now focused on refining techniques concerned with how to scale
into a potential big move, and how to scale out as the market moves in his
direction. He is focusing on the value of pyramiding a position to maximize the
leverage of his open equity. He is using his accumulated net profit to be able to
trade bigger positions without risking his own capital. The successful strategy
trader focuses his TradeStation testing on the percentage of his account that
should be risked with each trade, so as to maximize his profits and minimize the
drawdown.
Don’t underestimate how critical the size of your trade is, and how important it is
to add to a position at the right time. This may be more important than the
strategy itself!