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Fred,
I think you get different perspective from different approaches you
take.
I do not know if you use portfolio in you system (I guess you do), in
this case, I agree with Chuck on each member should stand on its own,
because compounding effect can cover up some weak performers due to
one shot great gain. [ Someone copied from another board written by
Palmer Wright discussed about this issue earlier, if you go and follow
that board, you will find more discussions there. In his and others
earlier writings there, some excellent discussions about position
sizing were presented]
This is why these postings are so great, they bring so many different
opinions to the table that allow us to think differently.
There is a new forum worth following:
www.turtletradingsoftware.com/forum/
Thomas
--- In amibroker@xxxxxxxxxxxxxxx, "Fred" <fctonetti@xxxx> wrote:
> Thomas,
>
> I guess where I was headed with this was that I want my system
> development, testing and optimization to be as close to real world
as
> possible for a variety of reasons.
>
> To illustrate a point and maybe ask a question regarding compounding
> and its effect on system design, testing and optimization:
>
> If one does compound either by increasing bet size or by increasing
> the number of positions one will hold as equity rises then one is
> looking to make consistant returns in terms of percentage or CAR.
>
> The results of consistant percentage gains produces an exponential
> curve on an arithmetic scale or if you prefer a straight line on a
> logarithmic scale.
>
> If this then is the goal i.e. consistant returns in terms of
> percentage, regardless of what one does with the gains even if one
> takes it out of the account to spend, then why would one build, test
> and optimize systems using PositionSize = positivenumber when
> currently this feature does not work in AB as one would use it real
> trading i.e. it does not limit the number of positions owned based
on
> equity. IMHO this leads one to the wrong conclusions in
development,
> testing and optimization and will continue to do so until this
aspect
> of AB is fixed.
>
> --- In amibroker@xxxxxxxxxxxxxxx, "tchan95014" <tchan95014@xxxx>
> wrote:
> > Fred,
> >
> >
> >
> >
> > Let me rephrase, my definition of compounding is one invests a %
of
> > equity. As simple as that, even if it is 5%, 10% does not matter.
> It
> > is nothing to do with one position, or 100 positions.
> >
> >
> >
> >
> > In your example, one is ALWAYS 100% invested, per my definition,
it
> is
> > compounding. If, as you example, one uses a fixed TOTAL amount,
say
> > $1M, even if one has acquired through investment a gain of $2M,
> then
> > it is NOT compounding. I agree with you here, it is not real life
> > investing style not compounding.
> >
> >
> >
> >
> > As for if any one is withdrawing money out of the gain to enjoy
the
> > fruit is nothing to do with compounding.
> >
> >
> >
> >
> > If I vote, I would vote for (in that order)
> >
> >
> > 1) real portfolio testing and real positionsizing along with it.
> >
> >
> > 2) 2-D surface chart included
> >
> >
> > 3) MCS
> >
> >
> > 4) Allow users to manipulate all the report statistics. (Someone
> asked
> > for addColumn() for optimize, scan... is a start)
> >
> >
> >
> >
> >
> >
> > Thomas
> >
> >
> >
> >
> > --- In amibroker@xxxxxxxxxxxxxxx, "Fred" <fctonetti@xxxx> wrote:
> >
> >
> > > Thomas,
> >
> >
> > >
> >
> >
> > > I'm not sure you got my point ... but maybe you did and I just
> don't
> >
> >
> > > follow your reply. I hadn't even gotten to talking about how
> >
> >
> > > positionsize = in AB relates to what people do in real life
> trading
> >
> >
> > > but it's my contention that for those that think they are not
> >
> >
> > > compounding by using positionsize = positivenumber and that this
> is
> >
> >
> > > the way they trade in real life, that if the number of positions
> > they
> >
> >
> > > are taking times the positionsize number continually approaches
> >
> >
> > > available equity and that equity is increasing over time that
> this
> >
> >
> > > too is a form of compounding even if bet size never changes.
> This
> > of
> >
> >
> > > course would be done in real life by one allowing more
postitions
> to
> >
> >
> > > be taken rather than by increasing bet size.
> >
> >
> > >
> >
> >
> > > Fred
> >
> >
> > >
> >
> >
> > > --- In amibroker@xxxxxxxxxxxxxxx, "tchan95014" <tchan95014@xxxx>
> >
> >
> > > wrote:
> >
> >
> > > > I agree completely. I think any time in a system design, if
one
> >
> >
> > > does
> >
> >
> > > > NOT use positionsize OR use position = negative value, then
one
> is
> >
> >
> > > > compounding. That is when one use % for positionsize input
then
> it
> >
> >
> > > is
> >
> >
> > > > compounding.
> >
> >
> > > >
> >
> >
> > > >
> >
> >
> > > >
> >
> >
> > > >
> >
> >
> > > > In Fred's example, it is positionsize = -100 (100% reinvested)
> OR
> >
> >
> > > > positionsize is NOT used at all (default = 100% reinvested)
> >
> >
> > > >
> >
> >
> > > >
> >
> >
> > > >
> >
> >
> > > >
> >
> >
> > > > Thomas
> >
> >
> > > >
> >
> >
> > > >
> >
> >
> > > >
> >
> >
> > > >
> >
> >
> > > > --- In amibroker@xxxxxxxxxxxxxxx, Fred Tonetti <ftonetti@xxxx>
> >
> >
> > > wrote:
> >
> >
> > > >
> >
> >
> > > >
> >
> >
> > > > > Regarding whether one in real life trading compounds or not
> it
> > is
> >
> >
> > > my
> >
> >
> > > >
> >
> >
> > > >
> >
> >
> > > > > contention that EVERYONE trading stocks or MF's compounds in
> one
> >
> >
> > > way
> >
> >
> > > > or
> >
> >
> > > >
> >
> >
> > > >
> >
> >
> > > > > another. (Futures because of the inherent leverage is a
> >
> >
> > > different
> >
> >
> > > > ball
> >
> >
> > > >
> >
> >
> > > >
> >
> >
> > > > > game).
> >
> >
> > > >
> >
> >
> > > >
> >
> >
> > > > >
> >
> >
> > > >
> >
> >
> > > >
> >
> >
> > > > > By this I mean if today you have $1mm in equity and you get
a
> > buy
> >
> >
> > > > signal
> >
> >
> > > >
> >
> >
> > > >
> >
> >
> > > > > or a bunch of buy signals you invest your $1mm in one
vehicle
> or
> >
> >
> > > you
> >
> >
> > > >
> >
> >
> > > >
> >
> >
> > > > > invest $10K each in potentially 100 vehicles i.e. you
> > potentially
> >
> >
> > > > get
> >
> >
> > > >
> >
> >
> > > >
> >
> >
> > > > > 100% invested. By the time you have grown that original
$1mm
> to
> >
> >
> > > > $2mm
> >
> >
> > > >
> >
> >
> > > >
> >
> >
> > > > > you are either investing your $2mm in one vehicle or you are
> >
> >
> > > > investing
> >
> >
> > > >
> >
> >
> > > >
> >
> >
> > > > > $10K each in potentially 200 vehicles i.e. you potentially
> get
> >
> >
> > > 100%
> >
> >
> > > >
> >
> >
> > > >
> >
> >
> > > > > invested.
> >
> >
> > > >
> >
> >
> > > >
> >
> >
> > > > >
> >
> >
> > > >
> >
> >
> > > >
> >
> >
> > > > > Isn't this the way we all invest/trade ? Are those that say
> > they
> >
> >
> > > >
> >
> >
> > > >
> >
> >
> > > > > disdain compounding really saying that when they've grown
> their
> >
> >
> > > $1mm
> >
> >
> > > > to
> >
> >
> > > >
> >
> >
> > > >
> >
> >
> > > > > $2mm that when they get a bunch of buy signals they are
still
> >
> >
> > > > investing
> >
> >
> > > >
> >
> >
> > > >
> >
> >
> > > > > only $1mm and leaving the other $1mm in money market ? If
> > that's
> >
> >
> > > > what
> >
> >
> > > >
> >
> >
> > > >
> >
> >
> > > > > you're doing then I'll take you at your word that you are
not
> >
> >
> > > >
> >
> >
> > > >
> >
> >
> > > > > compounding and have accepted the fact that over time you
> will
> > get
> >
> >
> > > >
> >
> >
> > > >
> >
> >
> > > > > declining returns on a percentage basis, but if you are
> >
> >
> > > potentially
> >
> >
> > > >
> >
> >
> > > >
> >
> >
> > > > > investing 100% even as equity grows then you are
> compounding.
> >
> >
> > > You
> >
> >
> > > > may
> >
> >
> > > >
> >
> >
> > > >
> >
> >
> > > > > not be increasing bet size but you are compounding never the
> >
> >
> > > less.
> >
> >
> > > >
> >
> >
> > > >
> >
> >
> > > > >
> >
> >
> > > >
> >
> >
> > > >
> >
> >
> > > > > Fred
> >
> >
> > > >
> >
> >
> > > >
> >
> >
> > > > >
> >
> >
> > > >
> >
> >
> > > >
> >
> >
> > > > > --- In amibroker@xxxxxxxxxxxxxxx, "Bob Jagow" <bjagow@xxxx>
> > wrote:
> >
> >
> > > >
> >
> >
> > > >
> >
> >
> > > > > > Fred,
> >
> >
> > > >
> >
> >
> > > >
> >
> >
> > > > > > Though I innately rebel at pyramiding, AB would afford me
> > great
> >
> >
> > > >
> >
> >
> > > >
> >
> >
> > > > > pleasure by,
> >
> >
> > > >
> >
> >
> > > >
> >
> >
> > > > > > as a 1st step, accepting subsequent buy signals that
> > deserving
> >
> >
> > > >
> >
> >
> > > >
> >
> >
> > > > > > tickers.triggered.
> >
> >
> > > >
> >
> >
> > > >
> >
> >
> > > > > >
> >
> >
> > > >
> >
> >
> > > >
> >
> >
> > > > > > Regards,
> >
> >
> > > >
> >
> >
> > > >
> >
> >
> > > > > > Bob
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