[dpaterso]

Good morning,

Nick:

Sorry to hear about your VS trades (or rather that you're a bit dissapointed at the moment). It's admirable that you're sticking to the system though. It's the only way to do things though as difficult as it may be. I must tell you that I saw your post last night and started to reply to it but got called away for something and did not finish my reply. While I was replying to you last night (to give you an example) one of my accounts was UP 24% ON THE DAY. As I type to you now the same account is now only UP 15% on yesterday i.e. the profits have gone down overnight i.e. in the last four hours. Dissapointing I know BUT I know for sure that, after I have now placed my stop and reverse orders, if they get hit, profit is locked in and I'll make some more on the stop and reverse. And, as is the nature of Wilder's systems, the chances are that some of the stop and reverse orders will NOT be hit and the profits will continue to climb in the next four hourse (probably even surpass the 24% of yesterday). The temptation is ALWAYS there to take profit when you see 'nice big juicy' profits in front of you BUT it's not following the system or proving anything i.e. by 'bailing early' you'll never be sure if your system is 'sound' or not. By following the trades through 'no matter what' I have proved to myself that the SI System is 'sound'.

NOW:

AGAIN:

This 'leverage thing':

I have worked out this little 'table' for us based on Wilder's money management rules taking our possible leverage settings into account. It's not much different from what I've been using up until now i.e. it's even slightly more conservative BUT is seems to make sense and regardless of your leverage setting it SHOULD protect you from overtrading.

Wilder says to not use more than 15% of your capital on a single commodity (I take that as being per instrument per trade). He also says to never have margined more than 60% of your total capital at any given moment in time. So in keeping with these rules this is what I've come up with:

Positions:

Leverage / Position size as a percentage of capital to not exceed:

50:1 / 15%*
100:1 / 7.5%
200:1 / 3.75%**
400:1 / 1.875%

Capital Management:

Leverage / Percentage of total capital margined at any given moment in time:

50:1 / 60% (GCI lot size $200)*
100:1 / 30% (GCI lot size $100)
200:1 / 15% (GCI lot size $50)**
400:1 / 7.5% (GCI lot size $25)

* Taken this to be the leverage that Wilder used and upon which he based his money management rules.

** The default for most of us.

As you can see: the higher your leverage the more capital you need in your account in order to comply with these (his???) money management rules.

I ALMOST guarantee that using the above maximums will 'keep you out of trouble'. Obviously you STILL have to take into account the $ value of a tick / point / pip movement i.e. you STILL do not attempt to trade Soybeans or the Brasilian Bovespa with a $500 account!!!