Asset Allocation by Malcolm Morley

If you’ve looked at my website you’ll get an idea of the approach I use, which is to basically divide my capital up amongst various ideas/methods/pairs etc. Then I apply sound money management methods against each individually. (By sound, I mean something like a FFP approach). That way, my good methods prosper; and my bad, wilt.

If you’ve looked at my website you’ll get an idea of the approach I use, which is to basically divide my capital up amongst various ideas/methods/pairs etc. Then I apply sound money management methods against each individually. (By sound, I mean something like a FFP approach). That way, my good methods prosper; and my bad, wilt.

Providing you keep track of what’s going on, you can then slowly add additional funds to the methods that are doing well.

Additionally, when you get a new idea, it can be implemented easily with a small capital allocation, and if it does well, simply move more funds to it from less successful methods. By using something like a FFP money management, nothing else changes – just the trade size.

and …

I separate things by using multiple sub-accounts, and assign a separate Excel worksheet for each method to keep track of performance and trade information (prior to automation, this was principally to manage my trade sizing algorithms). I also have an additional Excel sheet that adds everything up to give me my consolidated figures. Yard is correct, I feed the stars, and starve the dogs; that’s to say capital flows to what’s working, and providing my consolidated ‘ride’ is within acceptable limits, I don’t worry too much about the volatility of the components.

I have lived and breathed trading ever since trading fx professionally in London, Toronto and Philadelphia in the early 70's (yes I know that shows my age!). While my professional career subsequently took me from the trading desk to designing treasury systems for some of the world's leading financial institutions, my desire was to always trade for myself. As a consequence, following 5 years with a major international stock-broker (the last 3 as... More