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Udo -- interesting article. I would add that anyone thinking about
using a MM methodlogy should spend as much time testing it (with monte
carlo simulation) as they do testing their trading systems. After
all, nobody would think of trading a system without testing it... or
would they?
Mark
--- In amibroker@xxxx, Udo.Harke@xxxx wrote:
> Hi all
>
> who are interested in sophisticated methods regarding MM. Try this site
>
>
> http://www.netcapper.com/TrackTractsArchive/TT010302.htm
>
> on the Kelly Method.
>
> Regards,
>
> Udo
>
>
> -----Ursprüngliche Nachricht-----
> Von: Avcinci
> An: amibroker@xxxx
> Gesendet: Samstag, den 26. Oktober 2002 16:57 Uhr
> Betreff: Re: [amibroker] Money Management (MM) - Thread Summary
>
>
> Herman:
>
> I, too, enjoy your posts because they make me think. Even though
you are a recalcitrant curmudgeon :-))), I still like you and your
posts! Let me answer one more time, and then I'll stop.
>
> "High Performance systems" are those that give >100%ann.. on the
average (N100) per year when they work...Never argue with your system
performance indicators as they are much more important than market
(trend) indicators.
>
> Question: How do you establish system performance indicators? More
importantly, how do you know when your system suddenly stops
performing? I presume you won't know until after you have suffered
some losses. Yet, even when you are winning, there is a finite
probability that you will suffer a string of losses. So, how do you
know when your system is performing poorly before it is too late to
stop trading it?
>
> My revised :-) understanding of MM is that it trades profits for
safety. I believe you can reduce risk by diversification in stocks and
systems. Even "Market Wizards" and "Gurus" go out of style ...most of
them talk about past accomplishments. They can use knowledge and
trading methods way beyond anything we will ever command - they are
out of our league.
>
> I really don't think MM trades profits for safety. Take a look at
my post to Thomas a few minutes ago regarding risk betting in a
trading simulation game. You can take much larger positions on your
individual trades as long as you recognize you are playing with both
your money AND the market's money. You control risk and still advance
your profitability greatly without affecting expectancy. This is all
part of MM. Diversification has nothing to do with any of this. Each
trade you make, whether you are trading correlated markets or not, is
treated the same way (i.e., based on your equity at the time of the
trade). And, of course, there is nothing wrong with emulating market
wizards and gurus. They trade big bucks, we trade small bucks. But the
principles are exactly the same regardless of your account size.
>
> 2) I emphasized that my statements were based on personal
experience, they reflect what happened when I applied van Tharp's ATR
stops to my systems: it literally killed them flat. Perhaps wrongly, I
assumed that since they are called Tharp's stops that they are part of
MM. I didn't know how to test anything else in MM.
>
> Agreed. I don't know how to test the type of MM I've been talking
about either other than by engaging in trading simulation games. So,
you still use Amibroker to help you develop your system based on your
trading rules. You then go to the simulation games and practice
various MM strategies to see how well your profitability behaves when
using innovative MM techniques.
>
> So, we are really talking about something they say that works but
nobody has confirmed it at our competence level?
>
> I think it works because all it is is an application of a
mathematical manipulation of how you bet. Professional blackjack and
poker players and other game theorist types use these techniques all
the time. They have nothing to do with your trading system. That's
what you have to keep in mind.
>
> But the discussion raised points that would not have been covered
after I'd been brainwashed like you. It is like TA, you can really get
sucked into sophisticated chart analysis using the weirdest (sorry
folks) graphing tools or even the position of the moon (sorry again)
while simpler methods work just as well or better. Please don't react
by starting a thread on the merits of golden age TA... :-)
>
> I would take issue with your use of the word "brainwashed." Don't
worry, I didn't take it personally. I think I just bought off on the
whole idea of MM because it makes mathematical and logical sense to
me, and of course mathematics is the purest science, as you know. I
wholehearted agree with you on the use of TA; in that regard, we are
very much alike. I strictly adhere to the KISS principle.
>
> Thanks again, Herman, for a great thread. Now, back to system
development!
>
> Al V.
>
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