How to determine the optimial risk levels?

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oem7110
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How to determine the optimial risk levels?

Post by oem7110 » Mon Jul 04, 2011 11:58 pm

As we know, if we loss 20% of capital, it required 25% gained to recover the loss, does anyone have any suggestions on how to determine the optimial risk levels for portifolio? which level is more sustainable for mid term investment.
Thanks in advance for any suggestions

Risk | Gain for Recovered Lose
5% | 5%
10% | 11%
15% | 18%
20% | 25%
25% | 33%
30% | 43%
35% | 54%
40% | 67%
45% | 82%
50% | 100%

rhc
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Post by rhc » Tue Jul 05, 2011 3:10 am

. . . does anyone have any suggestions on how to determine the optimial risk levels for portifolio
Ed Seykota, on his website discusses the topic of risk and calculates the optimal risk for a coin toss game with various payoffs.
Perhaps you can find some useful information there.
Here is the link;
http://www.seykota.com/tribe/risk/index.htm

stopsareforwimps
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Re: How to determine the optimial risk levels?

Post by stopsareforwimps » Tue Jul 05, 2011 4:52 am

oem7110 wrote:...does anyone have any suggestions on how to determine the optimial risk levels for portifolio? ...
Ralph Vince covers this topic in considerable detail - with a fair bit of mathematics - in his books. I don't think you can get around the need for math in this area.

I liked this one best:

"The Handbook of Portfolio Mathematics: Formulas for Optimal Allocation & Leverage" by Ralph Vince.

They mostly all cover similar ground. I think he has a draft version somewhere for free download. He is a very creative thinker though a bit messy.

fab1usa1
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Post by fab1usa1 » Tue Jul 05, 2011 9:57 pm

I would suggest Van Tharp's "Definitive Guide to Position Sizing".

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