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Hi Herman- Not trying to start an argument, but feel compelled to
comment because you could not be more wrong. MM is incredibly
important and DOES give rock-solid, tangible results. Also, much of
Tharp's book is NOT irrelevant to mechanical traders. It's clear to
me that you just don't understand it. I remember you wrote something
similar about a technique in an article by William Eckhardt, one of
the greatest traders of all time, because you hadn't taken the time to
grasp his concept, either.
I offer this as constructive criticism and urge you and anyone else
who has given up on MM to go back and study it until you do get it.
It's not fun and it's certainly not as sexy as developing new
indicators. But, IMHO, it's the boring stuff and the details most
people overlook that will make you money trading. Unfortunately, that
takes a lot of time and effort. Thomas Edison once said: "Opportunity
is missed by most people because it is dressed in overalls and looks
like work." Think about it.
Best Regards,
Mark
--- In amibroker@xxxx, "Herman van den Bergen" <psytek@xxxx> wrote:
> Thanks Rick,
>
> Enough time on MM, I stuck it out way too long. I am going back
> to my other work where I am getting more tangible results.
>
> I am disappointed about all the hoopla about MM (it sounded like
> the HG of MM) that hasn't resulted in any practical and
> verifiable code whatsoever. Much of Tharp's book deals with
> issues that are irrelevant to the true mechanical trader, imho he
> is inconsistent in his method and presentation. He blends the
> most basic stuff with advanced stuff which I find very
> distracting. Book stuffing? But perhaps I am just not smart
> enough
>
>
> If anybody ever develops some practical afl code or has a
> complete an applied case with tangible results, not just words, I
> would appreciate you sharing it.
>
> happy trading,
> Herman.
> -----Original Message-----
> From: Rick Parsons [mailto:RickParsons@x...]
> Sent: 31 October, 2002 10:49 AM
> To: amibroker@xxxx
> Subject: RE: [amibroker] Re: Dynamic Money Management
>
>
> Herman,
> Your formula listed at the bottom of the chart may be outdated.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?
>
> Rick
> -----Original Message-----
> From: Herman van den Bergen [mailto:psytek@x...]
> Sent: Thursday, October 31, 2002 1:49 PM
> To: amibroker@xxxx
> 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 (at best 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@xxxx
> 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 is an 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 sure we have a positive expectancy system.
>
> Comments?
>
> Rick
> -----Original Message-----
> From: tchan95014 [mailto:tchan95014@x...]
> Sent: Wednesday, October 30, 2002 5:02 PM
> To: amibroker@xxxx
> 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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