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I just realized I left out one bit of complexity. The R-multiple is
dynamic. In other words, a 1R risk is dependent on the current equity. So, if
your equity grows to, say, $120,000, a 1R profit or loss is now equal to $1200,
not $1000 anymore, and a 5R profit is worth $6000, not $5000. So, you are
compounding your winnings somewhat in an anti-martingale manner. Of course,the
corollary is that if your equity falls to $90,000, the value of 1R drops to
$900. So, you have to know what the R-multiple is for each trade.
AV
<BLOCKQUOTE
>
----- Original Message -----
<DIV
>From:
<A title=RickParsons@xxxx
href="">Rick Parsons
To: <A title=amibroker@xxxxxxxxxx
href="">amibroker@xxxxxxxxxxxxxxx
Sent: Wednesday, October 30, 2002 8:24
PM
Subject: RE: [amibroker] Re: Dynamic
Money Management
<FONT color=#000080
size=2>Al,
Thanks for
sharing! You saved me some serious number crunching.
<FONT color=#000080
size=2>
How did you
like the course?
<FONT face="Vladimir Script" color=#000080
size=5>Rick
<FONT face=Tahoma
size=2>-----Original Message-----From: Avcinci
[mailto:avcinci@xxxx]Sent: Wednesday, October 30, 2002
8:09 PMTo: <A
href="">amibroker@xxxxxxxxxxxxxxxSubject:
Re: [amibroker] Re: Dynamic Money Management
Not any more Rick. When I took Tharp's Advanced Stock Market
course last year, he made a point that the way he suggested calculating
expectancy in his book is indeed very cumbersome. However, he said there is
a much easier way. You simply calculate everything in terms of R-multiples
(multiples of risk). For example, suppose you risk 1% of equity on each
trade, and your initial equity is $100,000. So, the value of 1R is $1000. If
your first trade makes $3000, you have made a 3R profit. If you lose $1500,
you lose 1.5R, if you make $10,000, you make 10R, etc. The easiest way to
calculate expectancy is simply to add up all your R-multiples, net themout
by subtracting the negative R-multiples from the positive ones, then divide
by the no. of trades. This gives you your expectancy per trade. Should be
very simple to do in AB.
Al V.
<BLOCKQUOTE
>
----- Original Message -----
<DIV
>From:
<A title=RickParsons@xxxx
href="">Rick Parsons
To: <A
title=amibroker@xxxxxxxxxxxxxxx
href="">amibroker@xxxxxxxxxxxxxxx
Sent: Wednesday, October 30, 2002
7:43 PM
Subject: RE: [amibroker] Re: Dynamic
Money Management
<FONT color=#000080
size=2>>>long enough to earn your
EXPECTANCY returns<<
I am in the
middle of Tharp's book, Trade Your Way to Financial
Freedom, and just finished the chapter 6 on
Expectancy. The idea of expectancy is an excellent way to pick
the "best" system.
<FONT color=#000080
size=2>
However if
one wants to calculate Expectancy the way Tharp does, it appears to be
VERY cumbersome when one has to group trades into profit ranges then
calculate each group separately to get the overall expectancy
number. (See pages 149 - 158)
<FONT color=#000080
size=2>
So I would
imagine if one wants all the MM and Dynamic Portfolio features, Amibroker
should first calculate expectancy on each system to make sure we havea
positive expectancy system.
<FONT color=#000080
size=2>
<FONT color=#000080
size=2>Comments?
<FONT face="Vladimir Script" color=#000080
size=5>Rick
<FONT face=Tahoma
size=2>-----Original Message-----From: tchan95014
[mailto:tchan95014@xxxx]Sent: Wednesday, October 30,
2002 5:02 PMTo: amibroker@xxxxxxxxxxxxxxxSubject:
[amibroker] Re: Dynamic Money ManagementI
completely agree with the quoted message. TR is flexible enough
to allow for almost any (risk) ideas you can think of to do the
position sizing: newrisk, volatility, margin, market activities,
group risk, group heat, portfolio risk / heat... and yes, the
portfolio level position sizing is the best feature. You can even
combine different systems each with different portfolio. It is a DOS
software but it is powerful.Money management (or rather more
accurately, position sizing or bet sizing) is an area not very often
discussed and not often appreciated.I have posted some timeago,
you can get some very detailed info from TradingRecipes.com as well
as traderclub.com by searching on "Mark Johnson"This
gentleman was kind enough to post many of the ACTUAL works he put in
using TR. 1) He offered right there a very simple long
term trend following system that works for FREE. 2)
He tested it using 1-contract with the worst possible fills you can
get 3) He test it using regular 1-contract
test 4) He then tested it using TR with position sizing
with a portfolio of more than 10 or 15 futures contracts (You even
get the TR code for FREE too, it is so easy you can learn by reading
it and understand the logic behind it.) 5) He tested
them over 10 or 20 years of history data. It isan
eye opening experience you do not want to miss.He also listed
his own trading results from actually following a vendor systemfor
3 or 4 years, most people would agree it was excellent
results.Go to both sites mentioned above and read as much as you
can. If you are interested in this subject, I have not found a
better place for education. All others only talk (including Tharp,
although I have to admit his book is OK), but you see hard numbers
here.While we are searching for a Holy grail system spending
endless time there, position sizing might offer a much easier path
because it optimizes the profit while controls the risk of your
choice, you know you can live long enough to earn your EXPECTANCY
returns.Wealth Lab is another software that claimed to havethis
capability but again is never actually verified to be correct.
(There was a long debate, discussion and even tests on the trader
club board about this but was never actually confirmed whether it is
working correctly.)TR will cost you > $2000 while Athena,
last heard, will cost you > $40000 (that is right!) They were
originated from the same idea and might even be from the same group
of persons (NOT Tharp though)I think, AB even with its current
capability is very close to be able to do the portfolio level
position sizing already. (with this AddToComposit() for now. Donot
quote me, it just came out of my head.) I think Tomasz can do it in
a very short time, the only issue is to test it. It takes time to
provide all the flexibility and iron out all the bugs, it is a big
challenge.With current AB structure,I think it has paved ways
for much more flexibility than TR can ever provide. Monte Carlo,
2/3D surface chart built in, any taker? ;-)Bob from TR has
promised a window version for years, but nothing has come out
yet.Thomas--- In amibroker@xxxx, "Al Venosa"
<avcinci@xxxx> wrote:> Tomasz:> > Yesterday,
I posted a message on Van Tharp's forum about your plans > to
incorporate innovative money management and pyramiding techniques
> in a future version of AB. Below is a response from a userof
Trading > Recipes, who claims that TR is the only software
that handles MM > corrrectly. Here is what he said:>
> "It DOES position sizing. the RIGHT way. I own the programand
it is > GREAT. It took me about 5 minutes to get over the
fact that it is > still a DOS based app. But it's really theONLY
tool that does it the > correct way.> > I
talked to AmiBroker about 6 months ago, and they told me the same
> thing. Plus once they do release the program with position
sizing, it > still has to be proven that they have done it
right. > > There are three other companies that I know
have that have tried to > do position sizing. Two of them got it
wrong. www.rinasystems.com and > www.bhld.com>
> The third is the athena program that is mentioned in Van's
book. I > haven't ever had the privilege of playing with that
program, but I > believe I read somewhere that it used output
files from trade > station. So, it would also fall into the
category of a program that > isn't truely implementing position
sizing at the portfolio level like > Trading Recipes
does."> > To explain what he meant by doing it 'the right
way', here is what he > said: > > "TRADING
RECIPES' approach lets you combine trading signals and trade
> sizing strategies into simulations which exactly mimic theway
you > would trade in real time. A core feature, which sets it
apart from > all other "money management" (or backtesting)
software, is its > ability to perform dynamic money management
(DMM) and risk control at > the portfolio level. With DMM,
position sizes are determined with > full knowledge of what's
going on at the portfolio level at the > moment the sizing
decision is made. Just like you do in reality. > Other software
packages simply sum individual pre-calculated equity > curves.
This way, position sizes are calculated with no knowledge of
> what the current portfolio conditions are at the crucial moment
when > a position sizing decision is to be made. This isnot
how you would > make decisions in reality and therefore such
simulations offer no > useful information to the trader. DMM
avoids this pitfall."> > TJ, will your approach be able to
do DMM as described above? > Personally, I have no desire touse
any program based on DOS. I think > the position sizing
algorithm now included in AB does almost what > this guy
describes except for scaling in and out of trades and basing
> one's decisions on the value of the entire portfolio of
multiple > stocks rather than a portfolio of one stock. >
> Al V.Post AmiQuote-related messages
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