|
PureBytes Links
Trading Reference Links
|
<BLOCKQUOTE
>
The
concept of using a greater position size on lower volatility seems like it
could be a dangerous trap. In many cases a stocks volatility will dry up while
in a consolidation. Specifically when approaching significant support/
resistance levels. Once the stock breaks (one way or the other) often times
the volatility can increase dramatically. Does not this approach leave you
vulnerable to being in an oversized position at exactly the
wrong time?
Jayson, I don't think so. Don't forget, you are
running stops based on your volatility setting, which remains fixed for the
trade duration. If the stock suddenly goes against you big, you lose. But you
would lose using any kind of stoploss (or no stoploss at all). True, you will
be in a larger position than when the volatility is higher, but that
could also work in your favor, too, if the price went in the direction of
your trade. Also, you can mitigate sudden changes in volatility by choosing a
long enough period for the ATR calculation (like 15 or 18 days rather than 10
or even less). You have to base your positionsize on something, and I think it
makes eminent sense to base it on volatility. It's worth doing some
backtesting.
AV
Jayson
<FONT face=Tahoma
size=2>-----Original Message-----From: phsst
[mailto:phsst@xxxxxxxxx]Sent: Tuesday, April 01, 2003 7:47
PMTo: amibroker@xxxxxxxxxxxxxxxSubject: [amibroker] Re:
Efficiency & ATR (Al V. & Jayson)"trade
restriction" meant that I had deliberately 'restricted' eachand every
trade PositionSize to $20K.The huge decrease in RAR was a surprise to
me too. That is what Imeant by stating that I had not done any due
diligence yet, thereforedon't read too much into the post that I made. But
thinking about it,even though the profits increased by 30%+ the
positionsize changecould have increased the capital requirements
significantly enough forthe trading system that RAR could have been
affected that much. Idon't know exactly how TJ calculates RAR, but it
would be logical thatRAR is dependent upon capital requirements for the
trading systemmeasured against the profit gains, all in combination with
the holdingperiod (exposure of capital).The comment about
reversing positionsize computation was simply aspeculation it would be
interesting to measure trading systems in twoways... 1) allocating greater
positionsize to lower volatility trades,and 2) allocating greater
positionsize to higher volatility trades.While it might not make sense, it
might be an interesting study... Younever know.BTW... what
software did you reply to the post? I'd like to use colortext for some
replies, but don't see a way to do it with the YahooPost or Reply browser
screen.Regards,Phsst--- In
amibroker@xxxxxxxxxxxxxxx, "Al Venosa" <advenosa@xxxx> wrote:> I
changed my pullback backtest to use your variable PositionSize = -1> *
BuyPrice/(2*ATR(15)).> > System went from $20k / trade
restriction to a range of $10k to $75k> per trade.> > I'm
not sure I follow you. What do you mean by "trade restriction"?Need more
info. > > Overall profit from the system increased about 30+%,
but RAR dropped> from 142% to just 6%+.> > That's a huge
decrease in RAR. I don't understand how you canincrease your overall
profits yet have such a huge decline in RAR.> > Have not done
any meaningful due diligence on results yet but was> astonished at how
some numbers changed. If the reported RAR number is> valid then it
might mean that some trading systems should reverse the> PositionSize
calculation.> > Again you've lost me. What do you mean by
reversing the positionsize statement? Can you be a little more specific?
> > Appreciate your idea, along with Chuck, Jayson, Graham &
Freds comments.> > Phsst> > > --- In
amibroker@xxxxxxxxxxxxxxx, "Al Venosa" <advenosa@xxxx> wrote:>
> I Agree that Raw ATR numbers are of little use. > > >
> Jayson, I presume you mean 'of little use' in relation to
defining> efficient stocks. However, ATR can be very useful in
establishing> positionsize. For example, many traders use a multiple of
ATR to> establish not only a max stoploss point but also to help
calculate how> big of an investment to make in a trade. Thus, risking
1% of current> equity in a trade, you can decide to take a position
using the> formula: PositionSize = -1 * BuyPrice/(2*ATR(15)). Here, raw
ATR is> very useful because if you happen to buy during a highly
volatile> time, your position size is lower because the 2*ATR is in
the> denominator. Conversely, if the volatility is low at the time of
the> buy, your position size is higher. This is a very effective
position> sizing strategy. > > > > Al V.>
> > > Yahoo! Groups
Sponsor
>
ADVERTISEMENT>
> >
> > > Send BUG REPORTS to bugs@xxxx> Send
SUGGESTIONS to suggest@xxxx>
-----------------------------------------> Post AmiQuote-related
messages ONLY to: amiquote@xxxxxxxxxxxxxxx > (Web page: <A
href="">http://groups.yahoo.com/group/amiquote/messages/)>
--------------------------------------------> Check group FAQ at:<A
href="">http://groups.yahoo.com/group/amibroker/files/groupfaq.html
> > Your use of Yahoo! Groups is subject to the Yahoo! Terms of
Service.Send BUG REPORTS to
bugs@xxxxxxxxxxxxxSend SUGGESTIONS to
suggest@xxxxxxxxxxxxx-----------------------------------------Post
AmiQuote-related messages ONLY to: amiquote@xxxxxxxxxxxxxxx (Web page: <A
href="">http://groups.yahoo.com/group/amiquote/messages/)--------------------------------------------Check
group FAQ at: <A
href="">http://groups.yahoo.com/group/amibroker/files/groupfaq.html
Your use of Yahoo! Groups is subject to the <A
href="">Yahoo! Terms of Service.
Send
BUG REPORTS to bugs@xxxxxxxxxxxxxSend SUGGESTIONS to
suggest@xxxxxxxxxxxxx-----------------------------------------Post
AmiQuote-related messages ONLY to: amiquote@xxxxxxxxxxxxxxx (Web page: <A
href="">http://groups.yahoo.com/group/amiquote/messages/)--------------------------------------------Check
group FAQ at: <A
href="">http://groups.yahoo.com/group/amibroker/files/groupfaq.html
Your use of Yahoo! Groups is subject to the <A
href="">Yahoo! Terms of Service.
Yahoo! Groups Sponsor
ADVERTISEMENT
Send BUG REPORTS to bugs@xxxxxxxxxxxxx
Send SUGGESTIONS to suggest@xxxxxxxxxxxxx
-----------------------------------------
Post AmiQuote-related messages ONLY to: amiquote@xxxxxxxxxxxxxxx
(Web page: http://groups.yahoo.com/group/amiquote/messages/)
--------------------------------------------
Check group FAQ at: http://groups.yahoo.com/group/amibroker/files/groupfaq.html
Your use of Yahoo! Groups is subject to the Yahoo! Terms of Service.
|