My Money and Open Trade Management Style
Thank you for wishing to learn more about my approach to both money management and open trade management – your trading account will thank you thoroughly.
All figures (stocks, PMs, oil, copper) given are futures prices of the nearest most liquid month – see that the position line says “futures” in bold.
Entries and exits are intended either at market (that’s as clear as it gets), or via placing a limit order (that means entering a GTC order and waiting whether it gets filled or not).
Let’s start with an example to illustrate how I go about it – let’s say I wrote in Stock Trading Signals that:
Trading position – S&P 500 (short-term; futures; my take): long positions (100% position size) (entered at market, which is 3,570 currently) with stop-loss at 3,500 and initial upside target at 3,700 are justified from the risk-reward perspective.
If you’re using e-mini S&P 500 futures, 1-point move in the S&P 500 amounts to $50. Multiply that with the difference between the entry and stop-loss, and better don’t risk more than 6% or maximum 8% of your trading account on this trade alone.
Trading position – Nasdaq (short-term; futures; my take): long positions (100% position size) (entered at market, which is 13,000 currently) with stop-loss at 12,000 and initial upside target at 15,000 are justified from the risk-reward perspective.
If you’re using e-mini Nasdaq-100 futures, 10-point move in Nasdaq 100 amounts to $200. Multiply that with the difference between the entry and stop-loss, and better don’t risk more than 6% or maximum 8% of your trading account on this trade alone.
or in Gold Trading Signals that:
Trading position – gold (short-term; futures; my take): long positions (100% position size) (entered at market, which is 1,902 currently) with stop-loss at 1,850 and initial upside target at 2,000 are reasonable from the risk-reward perspective.
If you’re using e-mini gold futures, 1-point move in gold amounts to $50. Multiply that with the difference between the entry and stop-loss, and better don’t risk more than 6% or maximum 8% of your trading account on this trade alone.
Trading position – silver (short-term; futures; my take): long positions (100% position size) (entered at market, which is 26.50 currently) with stop-loss at 25.00 and initial upside target at 28.00 are reasonable from the risk-reward perspective.
If you’re using e-mini silver futures, one dime move in silver amounts to $250. Multiply that with the difference between the entry and stop-loss, and better don’t risk more than 6% or maximum 8% of your trading account on this trade alone.
or in Oil Trading Signals that:
Trading position (short-term; futures; my take): long positions (100% position size) (entered at market, which is 64.00 currently) with stop-loss at 62.00 and initial upside target at 66.00 are justified from the risk-reward perspective.
or in Copper Trading Signals that:
Trading position – copper (short-term; futures; my take): long positions (100% position size) (entered at market, which is 3.30 currently) with stop-loss at 3.10 and initial upside target at 3.50 are justified from the risk-reward perspective.
If you’re using e-mini copper futures, 1-cent move in copper amounts to $125. Multiply that with the difference between the entry and stop-loss, and better don’t risk more than 6% or maximum 8% of your trading account on this trade alone.
or in Bitcoin Trading Signals that:
Trading position – Bitcoin (short-term; futures; my take): long positions (100% position size) (entered at market, which is 50,000 currently) with stop-loss at 44,500 and initial upside target at 63,000 are justified from the risk-reward perspective.
If you’re using micro Bitcoin futures, one thousand dollar move in Bitcoin amounts to $100. Multiply that with the difference between the entry and stop-loss, and better don’t risk more than 6% or maximum 8% of your trading account on this trade alone.
Trading position – Ethereum (short-term; futures; my take): long positions (100% position size) (entered at market, which is 3,500 currently) with stop-loss at 3,000 and initial upside target at 4,000 are justified from the risk-reward perspective.
If you’re using Ether futures, one hundred dollar move in Ethereum amounts to $5,000. Multiply that with the difference between the entry and stop-loss, and better don’t risk more than 6% or maximum 8% of your trading account on this trade alone.
The above is a helpful guideline on how to approach risk per trade in order to stay in the trading game for the long run. You may have heard the saying that there are either brave traders, or seasoned traders – and that implies that there are no brave seasoned traders. That’s because sooner or later, some trade is going to go mightily against the open position, and no one wants that to deliver the knock out blow.
So, the above 6% or 8% rule of thumb that I follow, serves as a filter, as an adjustment to every open trade position sizing so that following trades can be mounted with peace of mind and enough spare firepower to let the proven edge shine and bring profits. Trading is a marathon, and the next trade isn’t guaranteed to turn out whichever way – but over time, the profits outweigh the losses considerably, and money management works to make it happen.
In fact, money management is the true Holy Grail of trading. So, this is how I go about it.
Money management and my style
- I prefer trades that have their risk and reward sides favorably skewed, and that do not employ a faraway stop-loss, because I like trade ideas to be roughly comparable among themselves
- I mean comparability in terms of a 1-point move in the underlying asset without complicating the brackets position sizing parameter, which is almost always 100% (standardized – I leave different position sizing for advanced money management techniques)
- getting the direction right early on in each trade, is paramount, which is why the risk-reward ratio is carefully planned ahead, and adjusted as we go
- I see to it that a 1-point futures move in S&P 500 open position / 10-point futures move in Nasdaq 100 / 1-point futures move in gold / one dime move in silver / one dime move in oil / one cent move in copper / one thousand dollar move in Bitcoin / one hundred dollar move in Ether futures open position always affects the trading account equally, translating into:
- $100 move in S&P 500 futures / $1,000 move in Nasdaq 100 futures / $100 move in gold futures / $2,500 move in silver futures / $100 move in oil futures / $5,000 move in Bitcoin futures / $5,000 move in Ether futures
- $50 move in e-mini S&P 500 futures / $200 move in e-mini Nasdaq 100 futures / $50 move in gold e-mini futures / $250 move in silver e-mini futures / $50 move in oil e-mini futures / $125 move in copper e-mini futures
- $5 move in e-micro S&P 500 futures / $20 move in e-micro Nasdaq 100 futures / $5 move in gold e-micro futures / $100 move in Bitcoin e-micro futures
- a 100-point move in S&P 500 / 250-point move in Nasdaq 100 / $100 move in gold / $2 move in silver / $5 move in oil / $0.25 move in copper / $5,000 move in Bitcoin / $250 move in Ether at 100% position sizing should match your risk tolerance (the above mentioned 6% or 8% risk per trade, but really no more than 10%), and not result in a greater dollar move in the opening equity
- initial upside / downside target means initial (the position isn’t automatically closed upon reaching it, continues being open), and I update the open trade parameters in the nearest publication
- binding take-profit target means binding (upon reaching it, the position is automatically closed)
- orders are intended as GTC (good till cancelled)
- gains are not reinvested on autopilot, but I reassess changes in dollar allocation per trade on a long-term (annual) basis
- I don’t get carried away after a string of winning trades, I don’t increase the position sizing then, and neither should you
- stop-loss is a protection against worst case scenario – it isn’t set in stone, and indicates level at which it absolutely makes no sense to be in the trade
- my trading style is about active open trade management where both stop-loss and take-profit orders often are updated (or the trade is closed right away), reflecting the market situation and risk-reward ratio adjustments
- I focus on capturing medium-term moves (swing trading), and even if I turn on a dime intraday at times, my style is about reasonable trading frequence that’s managable for both traders and investors
- markets always offer differently hot opportunities over time, and my goal is to be positioned both within the individual market, but especially within the full portfolio so as to minimize volatility of returns
- this means I combine short-term and tactical approach to some markets, while engaging others from a medium-term point of view, in a dynamic balance
- that’s possible to do thanks to very high win ratio coupled with average win and average loss positively skewed to traders’ benefit
- accounting for tick size and inherent volatility of each asset, the weighting between signals covering each market, is to be equivalent over time – the trade result calculation (disregarding brokerage fees, slippage and taxes) presented in the portfolio performance is modulated only by individual position sizing of each trade that I adjust before entering so as to reflect momentary volatility and trade outlook
- I am generally more than willing to expose around 8% of trading equity in each trade, but due to active open trade management, the actual percentage gets usually much lower – and that’s good, because diligent risk-reward orientation brings about greater stability of returns
- given my long-term win ratio, this starting position sizing allocation per trade is both reasonable and optimal
- remember, professionals have their eyes set not on returns but on risk undertaken, and they exceed thanks to conservative focus on the downside
- it’s my maxim to take care of the risks first, because profits would then take care of themselves much easier
- I am not scaling in or scaling out – my position size remains the same throughout the open trade (unless I employ advanced money management techniques, which I am also telling you about)
If you just joined, have no open (S&P 500, Nasdaq 100, gold, silver, oil, copper, Bitcoin or Ethereum) trade and want to take me up on this one
- your risk-reward ratio is different, because your entry point is different
- if the price has run away from you (making the dollar distance to the stop-loss level too large for your appetite), strongly consider taking a smaller position size
- I rarely expose open profits to an adverse market move (i.e. I protect open profits through updating a trailing stop-loss or exiting the open trade well before it can get hit) as a rule of thumb
- as a result, entering (at market) into the open trade presented above is a good idea, but don’t risk more than around 6% or maximum 8% of your trading equity in this trade
- instead of risking more than around those 6% or maximum 8% of your trading equity in this trade, decrease your position size by half in this first trade of yours – your trading account will thank you should this trade not be a winning one
- remember that risk is the only variable that you can control in the markets, which means that no next trade is guaranteed to be a winner
For SPY, QQQ, GLD, SLV, USO, CPER, GBTC and ETHE ETF users
- be aware that you you’re not able to enter, exit or even update your trading orders virtually 24/7
- ETFs have much shorter trading hours, resulting in gaps that bring about inconsistent trading results
- commodity ETFs are exposed to rollover risks – contango is unfavorable to long-term investors
- to make up for that to some degree, decrease the position size (risk) in your open position by 25% vs. what would it be if you traded a futures instrument
instead, and use the dollar amount of those 25% saved to have a greater cushion in your stop-loss, which gets a bit more breathing room as a result - more breathing room doesn’t mean that extra space is allowed – active open trade management remains the same as for futures users
- be aware that the SPY, QQQ, GLD, SLV, USO, CPER, GBTC and ETHE equity curve can and will differ from the equity curve when futures instruments are used
- how exactly they would differ, depends primarily upon ETF fees, expenses, price volatility, gaps and potentially physical market disconnect, rollovers, splits etc.
For sectoral ETF / individual share users and vehicles outside the GLD, SLV, USO, CPER, GBTC or ETHE ETF
- in Stock Trading Signals, I most often discuss technology (XLK ETF) thanks to its heavy index weight, and value (VTV ETF) as it complements growth analysis
- other sectors might (and do) behave differently, and I usually highlight that in the context of rotation
- my key analytical and trade call focus is the S&P 500 and Nasdaq 100, so please for your own sake, don’t automatically translate my calls into the sector / ticker call of your own choosing, and ask my opinion instead
- in Gold Trading Signals, I focus on gold and silver, and look at other metals, gold or silver miners and various ratios only to drive my decisions on gold and silver
- please remember that precious metals apart from gold and silver are moving to their own tunes, which means that my gold signals can’t be extrapolated to other asset classes within the sector
- in Oil Trading Signals, I focus on oil (West Texas Intermediate), and look at select oil indices and various ratios only to drive my decisions on oil
- please remember that gasoline, heating oil or natural gas are moving to their own tunes, which means that my oil signals can’t be extrapolated to other asset classes within energy
- in Copper Trading Signals, I focus on copper, and look at other base metals only to drive my decisions on copper
- in Bitcoin Trading Signals, I focus on Bitcoin ($BTCUSD) and Ethereum ($ETHUSD), and may look at select other cryptocurrencies
- based on popular demand, I also analyze other assets and commodities such as uranium, rhodium, lumber, soybeans etc., but must receive a fitting question requesting such analysis first
That’s pretty much it! If you have any questions or would like to see more ground covered, please just let me know.
Good trading with confidence,
Monica Kingsley
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