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This explanation is correct.
If you do not have a positionsize statement in, and your system "works" -
has a positive expectancy, and you set the report to show every trade, you
soon see that you are investing more and more on each trade. You might do
this in real life, but I do not. When I put in the positionsize amount, it
is a realistic amount that I would place on each trade. I make it stay the
same for every trade, but of course it can vary.
Run the test with the positionsize line commented out, then again with it
in, and of course you see a big decrease in total profits (percent or
absolute). Which one would you actually trade?
Ken
-----Original Message-----
From: akaloustian [mailto:ara1@x...]
Sent: Monday, October 21, 2002 4:50 PM
To: amibroker@xxxxxxxxxxxxxxx
Subject: [amibroker] Re: PositionSize Variable - Help - Inexplicable
Results
The position size limits your profita as it is decreased.
The %profits are computed based on total starting equity.
So if your starting equity is $100K and positionsize = $20K gives you
a profit of $10K, that becomes 10% return.
If you remove position size, each trade uses all of the capital
available, so the return will be significantly higher.
Check your setting to see your starting amount available
Ara
--- In amibroker@xxxx, "n94612" <nkm@xxxx> wrote:
> I've been studying position sizing / money management for about a
> month or two now, and have been following most of the recent
postings
> on Money Management with great interest. My understanding is
> increasing, but I have been having some inexplicable results in
some
> backtests and explorations that I have been running as learning
tools
> regarding position sizing, and I sure could use some help or input:
>
> Like some others of you out there, I noticed that whenever I add
> position-sizing code to any of my experimental systems, the percent
> gain drops WAY down.
>
> For example, in one particular test using a Dip-Buying algorithm
> translated from Wealth-Script, the results were +18.54 with no
> position size statement in the code and only +0.07% with Tharp's
> volatility based stops set at a generous 5% of total equity.
> Lowering the % of TE to the recommended 1 or 2% resulted in further
> degradation of results, (1% : -0.02%loss and 2%: +0.00% negligible
> gain.) This did not surprise me as I had already read that many
of
> you had the same or similar experiences with severely impacted
gains
> in your own backtests that also were resultant from adding position
> sizing.
>
> However, I then determined to try to get an idea at what percentage
> of total equity risked with Tharps volatility, WOULD the results
come
> near to those obtained with no position sizing. That's when I
> discovered that it made almost no difference whether %TE risked was
> 0.1%, 0.2% or whatever, even at 10%, 25%, 33%, 50% and 100% of
total
> equity risked, the results were still enormously degraded compared
to
> those without explicitly coded position-sizing. That just didn't
> sound right to me.
>
> Growing suspicious, I then proceeded to test a wide range of fixed-
> dollar-amount sizings, and fixed-share-amount sizings, all with
> similarly degraded overall results as the Volatilty-based sizings.
> I found it made no significant difference whatsoever what position
> sizing scheme or formula I employed -- What I found was...
>
> ---As soon as the PositionSize variable is added to the code, the
> percentage gain results decrease dramatically. All of which leads
me
> to wonder...
>
> 1) What is the default for position size used in AmiBroker's
backtest
> calculations when the variable is NOT declared? Anybody know?
>
> --I don't think it's total equity from Settings because I tested
for
> that -- when I use the PositionSize variable using "capital/close"
> (total equity as position size) the results are still way down
(over
> 95% down) from teh non-declared sizing results, and if that is so,
> how can the non-declared sizings result in such better gains? It
> doesn't make sense.
>
> 2) Why can't these non-position sizing results be approximated
using
> ANY position-sizing formula when the variable IS declared? I have
> been wracking my brain on this, to no avail.
>
> Anybody else tried anything like this? If so, did you notice the
> same thing. I mean, I can ceratinly see where capping ones risk to
a
> small percentage of total equity, and the resulting inevitable
> decrease in position sizes, especially for very volatile issues,
must
> have SOME negative impact on profits and backtest results; Less
Risk-
> Less Profit; it's the price of insuring against catastrophic loss,
> and would be more pronounced the shorter the hold-time of the
system,
> but this effect should not occur with fixed-share or fixed-dollar
> sizings, at least not to the same degree. And, it seems to me,
that
> at SOME parameter range, the results using the "PositionSize"
> variable should approach and eventually approximate the default(no
> explicitly declared position size variable) gain percentages. But
> apparently, judging from the results of my own testing anyway, this
> is not occuring, so how are the better results without position
size
> declaration even possible?
>
> I'm baffled. Please anybody, help, comment, question, share
insights.
>
> If anyone out there gets interested enough to take the time and
> trouble to test some of their systems - not necessarily with Tharp-
> style volatility based position sizing - but with a similar wide
> variety of simpler, more "vanilla" share-based or dollar-amount-
based
> sizings, I'd sure love to hear what you find out.
>
> I'm hoping that this is some error or misunderstanding on my part
and
> not a problem inherent in the the PositionSize variable
> implementation, but on the off-chance I've inadvertantly uncovered
a
> glitch of some sort, it'd be a good thing to get to the bottom of
it.
>
>
> Respectfully,
>
> Nick Molchanoff
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