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<Does not this approach leave you vulnerable to being in an oversized
position at exactly the wrong time?>
I suppose that ANY variable positionsize trading system approach would
leave you with this vulnerability.
The best you can do is to manage your risk and take your chances. And
while I've never traded variable positionsizes, if backtesting
revealed sufficient data to support improved gains with no negative
implications with dd's & RAR, then I suppose I'd have to consider it.
Heck, I've gotten cut to pieces on trades with fixed positionsizes
where my Stops did no good because of gapping mkt conditions. The good
part is that backtesting of the system experienced the same losses
that I took in real life... but the systems were good enough to take
those occasional hits and still be robust enough to trade profitably.
It is all about doing absolutely reliable due diligence on your
backtested systems so that you make no false assumptions.
Regards,
Phsst
--- In amibroker@xxxxxxxxxxxxxxx, "Jayson" <jcasavant@xxxx> wrote:
> Phsst,
>
> You get the colors by using your email rather than posting and
replying to
> messages on the web site. in your preferences you may choose to
receive all
> posts in your email box.....
>
> 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
> -----Original Message-----
> From: phsst [mailto:phsst@x...]
> Sent: Tuesday, April 01, 2003 7:47 PM
> To: amibroker@xxxxxxxxxxxxxxx
> Subject: [amibroker] Re: Efficiency & ATR (Al V. & Jayson)
>
>
> "trade restriction" meant that I had deliberately 'restricted' each
> and every trade PositionSize to $20K.
>
> The huge decrease in RAR was a surprise to me too. That is what I
> meant by stating that I had not done any due diligence yet, therefore
> don't read too much into the post that I made. But thinking about it,
> even though the profits increased by 30%+ the positionsize change
> could have increased the capital requirements significantly enough for
> the trading system that RAR could have been affected that much. I
> don't know exactly how TJ calculates RAR, but it would be logical that
> RAR is dependent upon capital requirements for the trading system
> measured against the profit gains, all in combination with the holding
> period (exposure of capital).
>
> The comment about reversing positionsize computation was simply a
> speculation it would be interesting to measure trading systems in two
> ways... 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... You
> never know.
>
>
> BTW... what software did you reply to the post? I'd like to use color
> text for some replies, but don't see a way to do it with the Yahoo
> Post 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 can
> increase 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 position
> size 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.
> >
> >
> >
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> >
> >
> >
> >
> >
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