Customer Reviews

The Trading Game: Playing by the Numbers to Make Millions

5 star:		(14)
4 star:		(2)
3 star:		(3)
2 star:		(3)
1 star:		(10)

 

 

Unfortunately Ryan did a poor job with this one. This is not necessarily the easiest subject to explain, but it is the most important one for trading. There are several instances in his spreadsheets and examples where he isn't clear, and makes some incorrect comparisons. Mostly where he compares trading one contract vs. fixed ratio and fractional ratio - in relation to the drawdowns in each example. Run the numbers in a sim.

There are a couple other areas that I take serious issue with as well. One is porfolio weighting. Again he compares apples and oranges with his example of trading 1 S&P and 1 Corn vs. 1 S&P and 3 Corn. He states there is no reason to equalize positions and goes to great lengths to prove his point. He doesn't take into account the portfolio size and the unequal affect on gains and losses that come from not equalizing the positions, the point of which is supposed to be to reduce drawdowns and risk while increasing profits. Of course in hindsight having a heavier weighting in the S&P improved profits, (which he tries to use as an example to prove his point) but you don't know that ahead of time. Equalizing the positions equalizes the diversification and smoothes the equity curve. It is fine to overweight a certain market if you are doing it for a reason, like you expect it to outperform, but don't claim that it doesn't matter and there's no reason to do it.

Another thing he says is that Risk of Ruin isn't important "it just is." I can't even comment on that one.

This same type of thing, faulty reasoning, happens in several areas. If you are already familiar with money management and are sharp enough to catch these you might learn something.

As for the people complaining about his system, he includes a basic trend following system, it's a very good one. This is obvious to anyone that has done any mechanical system testing/trading. And his money management techniques are good too. No complaints there.

Larry Williams has a couple recent stock and futures books out. Both books have the same chapter on money management where he briefly explains "optimal F" (fixed fraction) and Jones' "fixed ratio". Then adds his own preference. One of those might be a better read. And Dr.Tharps "Trade Your Way To Financial Freedom" does a good job with position sizing. I'd read these first. And if you do get this one, make sure you run your own spread sheets.

If I had to recommend one book to read on trading, this would have to be it. While it does not cover every aspect of trading, it is the only book I have read that can actually deliver what the title implies. The author discusses all of the popular methods of money management in use by private and professional traders alike. There are times when the detailed and exhaustive examples can make the most enthusiastic reader bleary eyed. However, this is done for the benefit of the reader. The author is convinced that his method of money management is superior to traditional methods and takes pains to prove this with a comprehensive and step by step analysis of each. Additionally, he describes and gives the rules to a simple trading system that actually works better than most of the high-priced systems for sales in popular trading magazines. I have personnally back tested the system oulined in the book using his "Fixed Ratio" money management approach using TradeStation 2000i. I optimized the system parameters to a small degree to reflect them as a function of the respective markets in which it was being tested but still attempting to avoid curve-fitted results (i.e. the moving-average parameters in the SF may have been 24 and 5 days as opposed to them being 21 and 3 days in bond futures). I used this method with a stop-loss (also being a function of the market) in the following markets: TQ, SF, ED, ES and DX. I chose these markets for their relatively low margin requirements. Tested over the past four years yielded approximately $1,400,000. The author claims that if one has a system that generates at least $20,000 per year, that that amount can be parlayed into $1,000,000 in five years. Judging from the results from my own tests, this book delivers that and then some. What is interesting about Fixed Ratio money management is that it is independent of the system being used. You can add any number of systems and any number of markets and as long as the systems all generate a profit, the results just keep getting better and better. This is the result of allowing your equity to grow geometrically, with only a modest increase in your risk. You actually stand to increase your return by several hundred percent while you increase your risk by a few meager percentage points. If you are prepared psychologically to trade futures, equities or options then I urge you to purchase this book. Otherwise, get yourself mentally ready to trade by reading "The Disciplined Trader," by Mark Douglas (books by Ari Kiev and Van K. Tharp are also good) then return to this book/subject. It is revolutionary.

I read this book with mixed feelings. First, after looking at some of the reviews, I wondered if we were reading the same book. Now I know why -- the writing is terrible. Some sections I had to read 3 or 4 times before I even began to understood what he was talking abou. It does not surprise me that several reviewers obviously were clueless on what he was talking about. This book desperately needs a re-work.

My second reaction was "Finally a system for the small accounts". Most of the money systems I've seen are designed for major accounts (e.g. "don't risk more than 2% on a trade" -- yeah, right!) The trader with $10,000 or less should find a very workable system to manage his account. His system handles important issues of how to build equity on the way up, and another section on handling downturns, including streaks. He gives a good discussion on other money management techniques as well.

Wow!

It will take several.... several readings for it to make sense, but, believe me, it is well worth the effort. Hopefully we can look forward to a second edition that makes sense.

While the book quite exhaustively covers every popular method of money management, it's main focus is on the "Fixed Ratio" method. Since the author of the book is the creator of this method, his material is the only reliable source from which it can be learned. Proper money management will make you a millionaire much faster than any one system will - and that is what this book teaches. The balance between the ability to grow your money geometrically and maintain a comfortable risk level is what makes Fixed Ratio so superior to methods lile fixed fractional and Optimal f. For the price of the book, more valuable information cannot be had. (and you get a pretty robust system to boot!)

Requiring the same amount of per contract profit to move from trading 25 contracts to 26 as it takes to move from trading 1 contract to 2, is ridiculous. The percentage change in position sizes when adding 1 more contract to X number that you already have is not the same as doubling your position size from 1 contract to 2! And it should not require the same amount of per-contract profit.

Jones uses some "smoke and mirrors" to make his approach look much better than it is. He starts by using enormous leverage when his example account is small, then scales back the leverage as the account grows. He waits until he has scaled back the leverage to show what happens to the account when it encounters some losing trades. He doesn't show that, had these losses occurred when the account was smaller, they'd have wiped out the account due to the high leverage employed with the small account!

There are a bunch of logical and mathematical errors in this book. All in all, it is a joke. I'm surprised and disappointed that it ever made it to publication...

Limited number of books on Money Management. This is destined to become a classic. Does an excellent job of surveying other money management approaches (Optimal "f", Secure "f", Martingale, Anti-Martingale, etc.) before plugging his favorite: Fixed Ratio. His arguments are persuasive.

Jones does an excellent job distinguishing between money management and risk management.

He does an excellent job of addressing and often dismissing irrelevant factors that often confuse the money management discussion. An example - Risk Of Ruin: Jones writes: "Basically my reaction is 'who cares!' Risk of ruin has absolutely zero practical application in trading."

A couple "wishes" -- Jones favors "simulation" runs to evaluate different money management approaches presented as spreadsheet print outs. I think with a little work, some of these examples could have been made a little clearer, and a little more interesting (i.e. display graphically?). But perhaps that is a good exercise for the reader?

Another "wish": provide more information on available software -- except maybe it isn't available?? Jones mentions, only briefly, but at least twice, a software program he developed that appears to help one utilize the Fixed Ratio trading method. There is no more information on this, no web site, no nothing?? I've heard of people "over-hyping" their products, but Jones goes to the opposite extreme and barely mentions it??!! This might be helpful to those of us interested in pursuing his methods further.

All in all, an EXCELLENT book!!

I have to agree with the reader who says that Jones comparisions are like comparing apples and oranges.The book is filled with pages of boring tables which are not really useful and some examples contain inaccuracies. His book rambles with anecdotes and flows poorly. Save your money and find a different book

Jones does a good job highlighting the weaknesses of fixed fractional and the importance of money mangement. However, his comparisons are misleading. Construct your own tables to test his theory and you will see that his fixed ratio method does not overcome these weaknesses.

For instance, on page 86-87, he does a good job showing how a fixed ratio example with an account balance of $240,000 limits drawdown to 19% after 5 consecutive losses. However, he doesn't use this example to run his method for 5 consecutive wins (starting with $240k balance),which, if he did, would show a 21% return. Instead, he picks a lower point in the table where the rish/reward ratio is different. Clearly, his logic is flawed because he fails to compare the return on 5 consecutive wins with the drawdown on 5 consequtive losses using the same starting point of the fixed ratio table. Using his model example, at $240,000, 5 consecutive losses yields a drawdown of 19% versus the return of 21% for 5 consecutive wins. Accordingly it is obvious that his fixed ratio method does not yield any significant advantage over fixed fractional.

After meeting and talking with Ryan Jones at OmegaWorld conference in Vegas in 1999, and after he convinced me I needed his book(yeah right!), I bought it...and he was right, I do need this book. To correct you clowns who did negative reviews on this book claiming it was not a good trading 'method' or 'you can find the same thing in a probability book', YOU JUST DON'T UNDERSTAND WHAT'S GOING ON HERE. This book is not a trading system; it is a method for MONEY MANAGEMENT. If you don't know the difference between the two, then go back to school. This book shows you that trade size does make a huge difference in your day-to-day trading. It keeps you immune from annihilation. Thank you, Ryan; and thank you Larry Williams, and Murray Ruggerio, and all the others who spend countless hours helping us pros understand the nuances of trading equities. It's a good book, ladies and gentlemen. If you're serious about trading, then buy it!

I have been trading,reading, and writing about futures for 11 years. In my journey I was recommended Ryan Jones's book. In his book he details the various methods of money management, then he exposes their flaws, and finally he presents you with his solution for money management. This is a great book for any student that is serious about his success with futures. Ryan has a friendly approachable style to his writing that engrosses you, even though the information is laden down with statistics and mathematics.

It is a nice eye opener to really see how important money management is and how it can work for those that are dedicated and disciplined.

Purchasing this book ... will definitely help you keep more money in your pockets.

This book contains virtually all information on money management methods. And more. And though the tables are at times tiring, overall presentation is clear, short and no-nonsense. The author presents existing methods of position sizing and then presents his, Fixed Ratio. I think that for small trading accounts this method is the most suitable in terms of the balance of risk and reward.

Other parts of the book are equally good. The chapters on consecutive wins/losses, optimisation, trading systems, portfolios are valuable and interesting. The whole book is written from probabilistic point of view. It is based on maths, even though the examples and calculations are very basic.

Even if one disagrees with author's ideas, this book is one of those few that are compulsory for serious traders.