Please share your risk management and cash management ideas

greenback

I'm copying over my reply on how to manage futures trading account. Hopefully you can share your thoughts and your ideas with us ...

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This is how I am managing my trading accounts. Note that I strictly trade futures so the situation is a bit different if you use other instruments.

1. For each year, I preset a hard maximum amount that is dedicated for trading. I further split this amount between two brokerage firms, i.e. IB and TOS, to spread out the risk of failing brokerage firms. (It happened again some time last year!) This money, for us, can be absolutely lost 100%, and our life still goes on 100% unaffected, i.e. treat your trading effort as a small business. This is important to keep your sanity in trading.

Next I transfer my profit out of the trading accounts whenever each of them reaches the 5% profit target. I do so even if I mostly use the trend following method, i.e. I still hold my positions while transferring money out. I find this is another great method to keep my sanity and make it much easier for me to commit to my often long trend following trades.

2. Margin requirements and Positions: I never ever use full margin for futures since I hold my futures positions in days to weeks so the fluctuation is large and the stop loss is large too. I also set a maximum no. of position per account according to the preset account balance. Next I only hold 1/2 position in the trend following method. The other 1/2 is only deployed when there is a major swing coming and it will be quickly closed. Of course stop loss is set accordingly for both trades.

3. What about the trading profit? I have yet another cash brokerage account where I only hold income generating funds. I use PONDX and PTTDX to generate dividend due to the low interest rate of money market funds. These are basically hedge funds for bonds and are designed for orphans and widows so you can certainly sleep over them and don't need to worry about losing capital. Of course, PONDX is still a bit riskier and I use it because FED is still buying mortgage, which is over 90% of the PONDX holding. I may close it when the FED starts to change their policy.

Finally you apparently has a checking account for daily use.

silicon_beaver

Thanks for sharing.
IB and TOS are also my brokers.
Plus, I use Scottrade for regular stock trade.

hahaa

chinesebuffet

我只敢上马金玩大市！ 个股很少（因为它们经常失控！）

greenback

chinesebuffet 发表于 2013-5-31 08:52 AM
我只敢上马金玩大市！ 个股很少（因为它们经常失控！）

That's for sure.

I'm trading futures only. The leverage is way too high, so I dare not use the full margin power. Of course I don't day trade.