|
PureBytes Links
Trading Reference Links
|
hi Pal,
myself I do not use fractions of my account for trading as the Kelly
formula suggests. This is only usefull imo for the gambling example I
gave. Still, I use the concept of the Kelly formula to treat my
trades as if I was making a bet. I define the profit % for a winner
and the loss % for a looser since you can take a profit e.g. at 1%
and a loss at 10%. If I know these I can calculate how successful the
system needs to be in order to be profitable.
E.g. for a system where you take a profit at 2% and a loss at 10% you
need at least 85% of the trades to be winners for the system to be
profitable and then the profit is only marginable (about 11% profit
after 100 trades). Taking a profit at 1% and a loss at 20% leaves you
with a system that needs a chance of success greater than 96% .....
this looks rediculous but when choosing entry points carefully
chances your trades will make a 1% profit can be pretty good.
This is the approach I try to follow.
No, I have no experience yet with the money management formulas in
AB. At the moment I am playing with the portfoliotrader.
regards, Ed
--- In amibroker@xxxxxxxxxxxxxxx, "palsanand" <palsanand@xxxx> wrote:
> Thanks Ed. I have modified my available_equity = 0.5 *
Usable_Margin
> equation which previously used 0.42 as the coefficient. I then
> divide the available_equity equally among the positions I intedn to
> trade (diversification). This way I can enter at MOO (previous
days
> close price) and double up at High of Day/Low Day as predicted by
the
> AFL pivot points code, with the assumption (hope) that MOO is the
> best price to enter and that predicted High/Low of Day may never be
> touched. This method may approximate the kelly formula method of
> using 0.25 as the optimal fraction of the available_equity.
>
> Also, I came across some interesting code which might be of use:
>
> $max_risk_per_trade = .025; #never lose more than 2.5% per trade
> $risk_in_trade = $entry_price - $sell_stop; #percent decline to hit
> stop
> $coeff = $max_risk_per_trade / $risk_in_trade;
> $shares_to_buy = ($coeff * $equity) / $entry_price;
>
> There are also a lot of money_management formulas built-in into AFL
> in AB. I don't know how exactly to include these formulas with my
> available_equity formula to further enhance money_management. Any
> thoughts?
>
> rgds, Pal
>
>
> --- In amibroker@xxxxxxxxxxxxxxx, "ed2000nl" <pablito@xxxx> wrote:
> > money management is an interesting topic. Is anyone
using "Optimal
> f"
> > or other ideas by Ralph Vince? It doesn't make too much sense to
me
> > that once you have a winning system one needs to calculate the
> > optimal fraction for each wager so I never looked at it in detail.
> >
> > Interesting though is the example of the Kelly method. The
problem
> > is: what fraction of your account should you use for each bet /
> wager
> > to maximize your profits as fast as possible when the chance to
win
> > is 50%. Further constraints: a winning trade gives you a 200%
> return
> > and a losing trade gives a 100% loss. The answer is: 0.25 (this
you
> > can calculate using the Kelly formula but it is easy to simulate
> the
> > situation with a little program).
> >
> > Then I had the idea to treat my trades as "discrete" bets /
wagers
> in
> > order to find an optimal fraction of the account or just to find
> out
> > if a system could be profitable. I had the idea to use 1/100 of
my
> > account for each bet and take a profit quickly at 2% and use a
> > stoploss of 100%. In situations like this your system needs to be
> > pretty good. But the higher your stoploss the greater the chances
> are
> > that one day it will make a profit. And choosing the entry point
> > carefully, chances are pretty good you will be able to sell it
with
> a
> > 2% profit.
> >
> > I like the idea of exposing just a small amount of the account to
a
> > single trade and also to take a profit quickly.
> >
> > I must say I didn't finish working on these ideas yet in
detail....
> > since I am in the process of switching to Amibroker. But I would
> like
> > to read about other ideas about "money management"
> >
> > rgds, Ed
> >
> >
> >
> >
> > --- In amibroker@xxxxxxxxxxxxxxx, "Howard Bandy"
<howardbandy@xxxx>
> > wrote:
> > > Hi Guys -
> > >
> > >
> > >
> > > Remember that there is a limit to the amount of doubling up
that
> > can be done
> > > when using Martingale money management. One of the reasons
> casinos
> > say $5
> > > minimum $500 maximum is so that Martingales hit the $500 limit
> and
> > cannot
> > > recover the original $5 bet. Our own limits are our trading
> > accounts. Do
> > > the arithmetic and see how many consecutive losses it takes to
> hit
> > you own
> > > person limit. Then look at the summary of your trading system
> and
> > compute
> > > the probability that you will have that many consecutive losses.
> > >
> > >
> > >
> > > Another reason to be wary of Martingale systems is that they
> > require ever
> > > larger bets as successive losing trades occur. One of the
> methods
> > many of
> > > us use to determine whether a trading system is broken is by
> > looking at the
> > > sequence of trades and / or the equity curve. We Decrease
trade
> > size or
> > > stop using a system when it is taking serious losses.
Martingale
> > systems
> > > require Increasing the size of the bet / trade when losing.
> > >
> > >
> > >
> > > Howard
> > >
> > >
> > >
> > > -----Original Message-----
> > > From: palsanand [mailto:palsanand@x...]
> > > Sent: Tuesday, October 28, 2003 9:23 PM
> > > To: amibroker@xxxxxxxxxxxxxxx
> > > Subject: [amibroker] Re: Managing drawdowns (was % channels)
> > >
> > >
> > >
> > > Dave,
> > >
> > > There is a good link I came across:
> > >
> > > http://www.arbtrading.com/moneymanagement.htm
> > >
> > > I like the Anti-Martingale and Martingale (doubling up) systems
> to
> > > manage drawdowns. I would use a combination of these systems,
so
> > > that when I'm losing money I would use Martingale system and
when
> > I'm
> > > finally making money with the final position, I would be
> > > automatically switched over to Anti-Martingale system, but may
> most
> > > likely exit losing positions at break-even price. I would
double
> > up
> > > only when I get stronger signals verfied by OB/OS conditions in
> the
> > > subsequent session, so that my system of using 3BSMA for the
next
> > > session is temporarily suspended. It does take usually about 3
> > days
> > > for a trend-change to fully develop. I would not double up
> beyond
> > 3
> > > consecutive days, because if you are wrong 4 times in a row,
most
> > > likely the market is starting a new trend in the opposite
> direction
> > > and will go against you and so better to exit. I have done
this
> > many
> > > times, as I find it impossible to optimize my entry points.
But
> > the
> > > safest course is to wait for the actual Trend-change signal
> > verified
> > > by OB/OS conditions, then you may never have to double up but
you
> > may
> > > miss some signals. This may sound crazy for some but it does
> seem
> > to
> > > work for me especially with the AFL pivot points to predict the
> > Next
> > > bar approximate High/Low of Day and appropriate position sizing.
> > >
> > > Regarding whether your system has stopped working or not, it is
> > hard
> > > to say. I would try to improve the system performance using a
> > system
> > > of filters, stops and walkforward testing. Easier said than
> done...
> > >
> > > Regards,
> > >
> > > Pal
> > >
> > >
> > > --- In amibroker@xxxxxxxxxxxxxxx, "Dave Merrill"
<dmerrill@xxxx>
> > > wrote:
> > > > I've been wondering, could I trade a system with 50% average
> gain
> > > per year
> > > > since '95, and max system drawdown of 40-50%. even if I've
seen
> > > that in
> > > > backtests beforehand, could I really look at that kind of
drop
> in
> > > my account
> > > > and still believe I was doing the right thing? or would I
think
> > > it'd finally
> > > > just stopped working? and if I am able to ignore that much
> > > drawdown, how
> > > > would I know if it really *had* stopped working?
> > > >
> > > > by the half-the-gain-twice-the-drawdown tolerability rule,
this
> > is a
> > > > non-starter.
> > > >
> > > > dave
> > > > Defense ... Yep or as I've said it's not what you make,
it's
> > what
> > > you
> > > > keep. DD's are killers from lots of aspects not just in
> terms
> > of
> > > > what they do to your account balance but also what they do
to
> > ones
> > > > ability psycologically to trade and stay with systems that
do
> > > work.
> > >
> > >
> > >
> > >
> > >
> > >
> > > Yahoo! Groups Sponsor
> > >
> > >
> > >
> > > ADVERTISEMENT
> > >
> > >
> >
>
<http://rd.yahoo.com/M=244522.3707890.4968055.1261774/D=egroupweb/S=17
> > 056321
> > >
> >
>
98:HM/A=1595055/R=0/SIG=124j83ehr/*http:/ashnin.com/clk/muryutaitakena
> > ttogyo
> > > ?YH=3707890&yhad=1595055> Click Here!
> > >
> > >
> > >
> > > <http://us.adserver.yahoo.com/l?
> > M=244522.3707890.4968055.1261774/D=egroupmai
> > > l/S=:HM/A=1595055/rand=818896749>
> > >
> > >
> > > Send BUG REPORTS to bugs@xxxx
> > > Send SUGGESTIONS to suggest@xxxx
> > > -----------------------------------------
> > > 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!
> > > <http://docs.yahoo.com/info/terms/> Terms of Service.
------------------------ Yahoo! Groups Sponsor ---------------------~-->
Buy Ink Cartridges or Refill Kits for your HP, Epson, Canon or Lexmark
Printer at MyInks.com. Free s/h on orders $50 or more to the US & Canada.
http://www.c1tracking.com/l.asp?cid=5511
http://us.click.yahoo.com/mOAaAA/3exGAA/qnsNAA/GHeqlB/TM
---------------------------------------------------------------------~->
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 http://docs.yahoo.com/info/terms/
|