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Rick
-----Original Message-----
From: Herman van den Bergen [mailto:psytek@x...]
Sent: Thursday, October 31, 2002 1:49 PM
To: amibroker@xxxxxxxxxxxxxxx
Subject: RE: [amibroker] Re: Dynamic Money Management
Hi Rick, glad to see somebody else struggle through this :-) we should compare notes someday.
I am curious: what is you typical trading system like, short term (days) or long term (months)?
Rick, Van Tharp talks about Expectancy as if it were a stable parameter which is certainly not the case for short term trading systems (if my formula is correct). The Expectancy trends vary very similar to my Equity charts - as expected, so perhaps both can be used for equal purposes. Van Tharp does not seem to consider that many systems fade in and out of performance and that a good trading composite system would dynamically switch systems (atbest people only seem to switch stocks) to take advantage of high performance periods for the different systems.
Expectation = ( 1 + AveWinTrade/abs(AveLosTrade)) * PercentWinners - 1;
Best regards,
Herman
-----Original Message-----
From: Rick Parsons [mailto:RickParsons@x...]
Sent: 30 October, 2002 7:43 PM
To: amibroker@xxxxxxxxxxxxxxx
Subject: RE: [amibroker] Re: Dynamic Money Management
>>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 isan excellent way to pick the "best" system.
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)
So I would imagine if one wants all the MM and Dynamic Portfolio features, Amibroker should first calculate expectancy on each system to make surewe have a positive expectancy system.
Comments?
Rick
-----Original Message-----
From: tchan95014 [mailto:tchan95014@x...]
Sent: Wednesday, October 30, 2002 5:02 PM
To: amibroker@xxxxxxxxxxxxxxx
Subject: [amibroker] Re: Dynamic Money Management
I 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 time ago, 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 is an eye opening experience you do not want to miss.
He also listed his own trading results from actually following a
vendor system for 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 have this 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. Do not 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 user of
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 program and 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 the ONLY 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 the way 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 is not 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 to use 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.
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<DIV><SPAN class=210314715-31102002><FONT color=#000080
size=2>Herman,</FONT></SPAN></DIV>
<DIV><SPAN class=210314715-31102002><FONT color=#000080 size=2>Your formula
listed at the bottom of the chart may be outdated. Did you see Al's post
on R multiples and how Expectancy changes as equity
changes?</FONT></SPAN></DIV>
<DIV> </DIV>
<DIV><STRONG><FONT face="Vladimir Script" color=#000080
size=5>Rick</FONT></STRONG></DIV>
<BLOCKQUOTE>
<DIV class=OutlookMessageHeader dir=ltr align=left><FONT face=Tahoma
size=2>-----Original Message-----<BR><B>From:</B> Herman van den Bergen
[mailto:psytek@x...]<BR><B>Sent:</B> Thursday, October 31, 2002 1:49
PM<BR><B>To:</B> amibroker@xxxxxxxxxxxxxxx<BR><B>Subject:</B> RE: [amibroker]
Re: Dynamic Money Management<BR><BR></FONT></DIV>
<DIV><FONT face=Arial color=#0000ff size=2><SPAN class=490412115-31102002>Hi
Rick, glad to see somebody else struggle through this :-) we
should compare notes someday.</SPAN></FONT></DIV>
<DIV><FONT face=Arial color=#0000ff size=2><SPAN
class=490412115-31102002></SPAN></FONT> </DIV>
<DIV><FONT face=Arial color=#0000ff size=2><SPAN class=490412115-31102002>I am
curious: what is you typical trading system like, short term (days) or long
term (months)? </SPAN></FONT></DIV>
<DIV> </DIV>
<DIV><FONT color=#0000ff><FONT face=Arial size=2><SPAN
class=490412115-31102002>Rick, Van Tharp talks about Expectancy as if it were
a stable parameter which is certainly not the case for short term trading
systems (if my formula is correct). </SPAN></FONT><FONT face=Arial
size=2><SPAN class=490412115-31102002>The Expectancy trends vary verysimilar
to my Equity charts - as expected, so perhaps both can be used for equal
purposes. Van Tharp does not seem to consider that many systems fade in and
out of performance and that a good trading composite system would dynamically
switch systems (at best people only seem to switch stocks) to take advantage
of high performance periods for the different
systems.<BR></SPAN></FONT></FONT></DIV>
<DIV><FONT face=Arial><SPAN class=490412115-31102002><FONT size=2><IMG alt=""
hspace=0 src="cid:210314715@xxxx"; align=baseline border=0><BR><FONT
face="Courier New" color=#009300></FONT><FONT size=1>Expectation = (
</FONT></FONT><FONT size=1><FONT face="Courier New"
color=#ff00ff>1</FONT><FONT face="Courier New" color=#009300> +
AveWinTrade/</FONT><B><FONT face="Courier New"
color=#0000ff>abs</B></FONT></FONT><FONT size=1><FONT face="CourierNew"
color=#009300>(AveLosTrade)) * PercentWinners - </FONT><FONT
face="Courier New" color=#ff00ff>1</FONT><FONT face="Courier New"
color=#009300>;</FONT></FONT></SPAN></FONT></DIV>
<DIV><FONT face=Arial><SPAN
class=490412115-31102002></SPAN></FONT> </DIV>
<DIV><FONT face=Arial color=#0000ff size=2>B<SPAN class=490412115-31102002>est
regards,</SPAN></FONT></DIV>
<DIV><SPAN class=490412115-31102002></SPAN><SPAN
class=490412115-31102002></SPAN><FONT face=Arial color=#0000ff size=2>H<SPAN
class=490412115-31102002>erman</SPAN></FONT></DIV>
<DIV><FONT face=Arial color=#0000ff size=2><SPAN
class=490412115-31102002></SPAN><BR></FONT><FONT face=Tahoma><FONT
size=2><SPAN class=490412115-31102002> </SPAN>-----Original
Message-----<BR><B>From:</B> Rick Parsons
[mailto:RickParsons@x...]<BR><B>Sent:</B> 30 October, 2002 7:43
PM<BR><B>To:</B> amibroker@xxxxxxxxxxxxxxx<BR><B>Subject:</B> RE: [amibroker]
Re: Dynamic Money Management<BR><BR></DIV></FONT>
<BLOCKQUOTE
style="PADDING-LEFT: 5px; MARGIN-LEFT: 5px; BORDER-LEFT: #0000ff 2px solid"></FONT>
<DIV><SPAN class=720543400-31102002><FONT color=#000080 size=2>>><FONT
color=#000000 size=3>long enough to earn your EXPECTANCY
returns<<</FONT></FONT></SPAN></DIV>
<DIV><SPAN class=720543400-31102002></SPAN> </DIV>
<DIV><SPAN class=720543400-31102002><FONT color=#000080 size=2>I am in the
middle of Tharp's book, <U>Trade Your Way to Financial
Freedom</U>, and just finished the chapter 6 on Expectancy.
The idea of expectancy is an excellent way to pick the "best"
system.</FONT></SPAN></DIV>
<DIV><SPAN class=720543400-31102002><FONT color=#000080
size=2></FONT></SPAN> </DIV>
<DIV><SPAN class=720543400-31102002><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></SPAN></DIV>
<DIV><SPAN class=720543400-31102002><FONT color=#000080
size=2></FONT></SPAN> </DIV>
<DIV><SPAN class=720543400-31102002><FONT color=#000080 size=2>SoI would
imagine if one wants all the MM and Dynamic Portfolio features, Amibroker
should first calculate expectancy on each system to make sure we have a
positive expectancy system.</FONT></SPAN></DIV>
<DIV><SPAN class=720543400-31102002><FONT color=#000080
size=2></FONT></SPAN> </DIV>
<DIV><SPAN class=720543400-31102002><FONT color=#000080
size=2>Comments?</FONT></SPAN></DIV>
<DIV> </DIV>
<DIV><STRONG><FONT face="Vladimir Script" color=#000080
size=5>Rick</FONT></STRONG></DIV>
<BLOCKQUOTE>
<DIV class=OutlookMessageHeader dir=ltr align=left><FONT face=Tahoma
size=2>-----Original Message-----<BR><B>From:</B> tchan95014
[mailto:tchan95014@x...]<BR><B>Sent:</B> Wednesday, October 30, 2002
5:02 PM<BR><B>To:</B> amibroker@xxxxxxxxxxxxxxx<BR><B>Subject:</B>
[amibroker] Re: Dynamic Money Management<BR><BR></FONT></DIV><TT>I
completely agree with the quoted message. <BR><BR>TR is flexible enough to
allow for almost any (risk) ideas you can <BR>think of to do the position
sizing: newrisk, volatility, margin, <BR>market activities, group risk,
group heat, portfolio risk / heat... <BR>and yes, the portfolio level
position sizing is the best feature. You <BR>can even combine different
systems each with different portfolio. It <BR>is a DOS software but it is
powerful.<BR><BR>Money management (or rather more accurately, position
sizing or bet <BR>sizing) is an area not very often discussed and not
often appreciated.<BR><BR>I have posted some time ago, you can get some
very detailed info from <BR>TradingRecipes.com as well as traderclub.com
by searching on "Mark <BR>Johnson"<BR><BR>This gentleman was kind enough
to post many of the ACTUAL works he <BR>put in using TR.<BR>
1) He offered right there a very simple long term trend following
<BR>system that works for FREE.<BR> 2) He tested it using
1-contract with the worst possible fills you <BR>can get<BR>
3) He test it using regular 1-contract test<BR> 4) He then
tested it using TR with position sizing with a <BR>portfolio of more than
10 or 15 futures contracts (You even get the <BR>TR code for FREE too, it
is so easy you can learn by reading it and <BR>understand the logic behind
it.)<BR> 5) He tested them over 10 or 20 years of history
data.<BR><BR> It is an eye opening experience you do not want
to miss.<BR><BR>He also listed his own trading results from actually
following a <BR>vendor system for 3 or 4 years, most people would agree it
was <BR>excellent results.<BR><BR>Go to both sites mentioned above and
read as much as you can. If you <BR>are interested in this subject, Ihave
not found a better place for <BR>education. All others only talk
(including Tharp, although I have to <BR>admit his book is OK), but you
see hard numbers here.<BR><BR>While we are searching for a Holy grail
system spending endless time <BR>there, position sizing might offer amuch
easier path because it <BR>optimizes the profit while controls the risk of
your choice, you know <BR>you can live long enough to earn your EXPECTANCY
returns.<BR><BR>Wealth Lab is another software that claimed to have this
capability <BR>but again is never actually verified to be correct. (There
was a long <BR>debate, discussion and even tests on the trader club board
about this <BR>but was never actually confirmed whether it is working
correctly.)<BR><BR>TR will cost you > $2000 while Athena, last heard,
will cost you > <BR>$40000 (that is right!) They were originated from
the same idea and <BR>might even be from the same group of persons (NOT
Tharp though)<BR><BR>I think, AB even with its current capability is very
close to be able <BR>to do the portfolio level position sizing already.
(with this <BR>AddToComposit() for now. Do not quote me, it just cameout
of my <BR>head.) I think Tomasz can do it in a very short time, the only
issue <BR>is to test it. It takes time to provide all the flexibilityand
iron <BR>out all the bugs, it is a big challenge.<BR><BR>With currentAB
structure,I think it has paved ways for much more <BR>flexibility than TR
can ever provide. Monte Carlo, 2/3D surface chart <BR>built in, any taker?
;-)<BR><BR>Bob from TR has promised a window version for years, but
nothing has <BR>come out yet.<BR><BR><BR>Thomas<BR><BR><BR><BR>--- In
amibroker@xxxx, "Al Venosa" <avcinci@xxxx> wrote:<BR>>
Tomasz:<BR>> <BR>> Yesterday, I posted a message on Van Tharp's
forum about your plans <BR>> to incorporate innovative money management
and pyramiding <BR>techniques <BR>> in a future version of AB. Below is
a response from a user of <BR>Trading <BR>> Recipes, who claims that TR
is the only software that handles MM <BR>> corrrectly. Here is what he
said:<BR>> <BR>> "It DOES position sizing. the RIGHT way. I ownthe
program and it <BR>is <BR>> GREAT. It took me about 5 minutes to get
over the fact that it is <BR>> still a DOS based app. But it's really
the ONLY tool that does it <BR>the <BR>> correct way.<BR>> <BR>>
I talked to AmiBroker about 6 months ago, and they told me the same
<BR>> thing. Plus once they do release the program with position
sizing, <BR>it <BR>> still has to be proven that they have done it
right. <BR>> <BR>> There are three other companies that I know have
that have tried to <BR>> do position sizing. Two of them got it wrong.
www.rinasystems.com <BR>and <BR>> www.bhld.com<BR>> <BR>> The
third is the athena program that is mentioned in Van's book. I <BR>>
haven't ever had the privilege of playing with that program, but I
<BR>> believe I read somewhere that it used output files from trade
<BR>> station. So, it would also fall into the category of a program
that <BR>> isn't truely implementing position sizing at the portfolio
level <BR>like <BR>> Trading Recipes does."<BR>> <BR>> To explain
what he meant by doing it 'the right way', here is what <BR>he <BR>>
said: <BR>> <BR>> "TRADING RECIPES' approach lets you combine
trading signals and <BR>trade <BR>> sizing strategies into simulations
which exactly mimic the way you <BR>> would trade in real time. A core
feature, which sets it apart from <BR>> all other "money management"
(or backtesting) software, is its <BR>> ability to perform dynamic
money management (DMM) and risk control <BR>at <BR>> the portfolio
level. With DMM, position sizes are determined with <BR>> full
knowledge of what's going on at the portfolio level at the <BR>> moment
the sizing decision is made. Just like you do in reality. <BR>> Other
software packages simply sum individual pre-calculated equity <BR>>
curves. This way, position sizes are calculated with no knowledge <BR>of
<BR>> what the current portfolio conditions are at the crucial moment
<BR>when <BR>> a position sizing decision is to be made. This is not
how you would <BR>> make decisions in reality and therefore such
simulations offer no <BR>> useful information to the trader. DMM avoids
this pitfall."<BR>> <BR>> TJ, will your approach be able to do DMM
as described above? <BR>> Personally, I have no desire to use any
program based on DOS. I <BR>think <BR>> the position sizing algorithm
now included in AB does almost what <BR>> this guy describes except for
scaling in and out of trades and <BR>basing <BR>> one's decisions on
the value of the entire portfolio of multiple <BR>> stocks rather than
a portfolio of one stock. <BR>> <BR>> Al
V.<BR><BR></TT><BR><BR><TT>Post AmiQuote-related messages ONLY to:
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