Traders' Roundtable

Thanks for the links Kianti. Interesting to note how the presenters jump right over the Bernouilli assumption and apply it directly to trading. Maybe their style always result in an equal amount of money won or lost on every trade! ;-) One thing that makes Vince an interesting study is that he actua...

Forum Mgmnt, I'd be interested in seeing the paper, if and when you get around to it. One reason I'm interested in your paper is that Ralph discusses Risk-of-Ruin, and goes on to show how it's integral to bet size. Actually, I think his premise is the two things are different sides of the same coin,...

Forum Mgmnt, In my opinion, you are playing with serious fire if you trade even 80% of optimal f. Optimal f or even 80% thereof assumes you have a good picture of what the population of possible trades looks like. This seems to be a dubious foundation upon which to build your wealth. I agree 100% (e...

Karakoram, All these are excellent points. After collecting up your requirements, and starting your design, you might want to consider commercial or open source libraries to implement some of those requirements. It sure helps whittle down the work. One library that comes to mind is SmartQuant ( http...

Almost forgot to state a basic assumption: the input trade series used to callibrate any sizing method must be a single, constant contract for each trade.

Cheers,

Kevin

c.f. Just for the sake of grounding this discussion which I find hard to follow since we haven't agreed on definitions of either approach or the formulas, would you mind outlining the formulas you used to generate the above graph, what was required as inputs for each bet size type, and where you got...

Gambler ruin does occur on the right side of the peak, but the one point to the right side and one point to left should be logically equivalent No? There is variance involved no? lperepol, I think you've hit the nail on the head. You can take and graph what is optimal for any particular run. If you...

Iperepol, warm greetings from a former web-footed Seattlite. I was wondering if any one compared Monte Carlo methods to Ralph Vince's formula? Ralph does spend some ink in mentioning Monte Carlo as a means. I read his book "The New Money Management" and was disappointed. I am confident tha...

Jake, Spot on. The 1987 price shock would be another great example to include , not avoid, when testing for initial capital and account performance. In other words, I would enumerate these kind of events, then start a back testing run just prior to the each event with the starting capital. My perspe...

Jake, I like your idea of testing with initial starting capital on a rolling, yearly basis. For many situations, it's easy to automate and report these type of results, and make comparisons between reports. I'd like to build on that idea, but consider doing it based on events. Events, of course, wil...

Ross,

Looks like MAR is off by 1 decimal. I find it easiest to express CAGR as %, then dividing by Max DD % keeps the same units. The example with CAGR=9.16% and MaxDD=48.4% would yeild MAR=0.18.

Otherwise, looks good.

Cheers,

Kevin

I do have the materials mentioned. I'll give the caveat that I have not finished going through his entire course, so I can comment on what I know. I believe there is value in some of the exercises and mental preparations contained in the material, especially when they can shed light on habits or goa...

Ted, thank you much for organizing the links ... very insightful discussions.

I have a question for moderator: with all these different threads, where is the best place to continue the discussion?

Thanks,

Kevin

Hi Ross! :-) I'll throw a couple things into the kettle, both from Ralph Vince "Portfolio Management Formulas". On page 45 of Ralphs starts with "Let's begin by determing what is a good measure of performance ...". He then derives a Pessimistic Return Ratio (PRR) as follows: PRR ...

I happen to agree with verec, maybe because we both think in Java (?). The libraries and constructs make a HUGE difference for usuability. So I will second what he mentions, and add a few bits ... Other extremely important aspects are orthogonality, composition, and cannonical form. By orthogonality...

Shakyamuni, I assume you're familiar with www.fixprotocol.org? They have a listserve mailing list where you can contact other people working fix implementations directly. Unfortunately, I searched the archives and best I could come up were the following ... One day there'll be ISO XML - the result o...

Joe, Ralph provides BASIC code for finding Optimal-f in Appendix B, page 189. He describes two methods for find Optimal-f starting on page 84. Optimal-f isn't succinctly described in a short formula. To quote one web source "Optimal-f is found in a round about way". The optimization involv...

Scaling, or adding additional units/positions makes an interesting study. As shakyamuni suggests, there are all sorts of "shapes" one could apply, and they have widely different characteristics. I use the term "scaling in" when the total size of aggregate position is known in adv...

Unfortunately, the term "Money Management" is used to mean different things by different traders. Some people mean using stops, period. Some people mean cutting losses. Some people tie it back to risk exposure in the portfolio, some people imply bet size, some even include scaling. So, whe...

ksberg, I used to do #2 and #3. Now I am experimenting with #4. http://www.tradingblox.com/forum/viewtopic.php?p=5749&highlight=#5749 Haven't tested Turtle system yet. My instinct predicts that #4 could do it with scaling-in and with correlated position limits and all the rest .... if desired ....