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Thanks for link. Something interesting mentioned there:
All the multitude of money management algorithms may be divided in
two principal classes: martingale and antimartingale.
Martingale methods state that the risk should increase as the capital
decreases. These methods are popular with traders trying to extract
profit from a series of losses or break-even trades.
Let us review an application of martingale in roulette. We bet 1$ on
a color and every time we lose, we double the bet. Next time after we
win, we start at 1$ again. If we lose 10 times in a row, which may
happen with a probability of (19/37)^10 or 0,13%, we'll have to bet
$1024 to win $1. Since in such a case the expected profit/risk ratio
is disastrously low, it is often supposed that martingale methods may
not be used in trading. But, one should keep in mind that in popular
trend-following methods:
1) profits are usually 2-3 times larger than losses
2) series of small losses or break-even trades are typically
interspersed with large profits
So martingale methods in our opinion deserve a serious study.
I found this to be very true. Typically my trades have either a
series of small losses or more commonly break-even trades
interspersed with hugh gains which dwarfs these series of small
losses or break-even trades, but I use martingale method only very
rarely, i.e, only when the nature of the signal warrants it....
rgds, Pal
--- In amibroker@xxxxxxxxxxxxxxx, "Fred" <fctonetti@xxxx> wrote:
> For those who have an interest in a variety of MM techniques here's
a
> short course in a lot of what's out there ...
>
>
http://www.tsresearchgroup.com/en/articles/public_20020402010706.php
>
> --- In amibroker@xxxxxxxxxxxxxxx, "Fred" <fctonetti@xxxx> wrote:
> > Nice try ... As far as what trading system he used and whether or
> not
> > it was viable, how would I know. As far as what MM techniques he
> > used, again how would I know except for the fact that it seems to
> say
> > one of two things, either his stuff doesn't work as demonstrated
in
> > his book or he didn't think well enough of it to use it as
opposed
> to
> > using something else. As far as your other reference goes, your
> > either part of that group in which case you should have
understood
> > the reply I made and it should have made some sense or you aren't
> in
> > which case you don't have a clue as to what you are referring to.
> >
> > --- In amibroker@xxxxxxxxxxxxxxx, "MarkF2" <feierstein@xxxx>
wrote:
> > > "LOL, right ..."? What simulation software did you use? No
> > answer?
> > > I didn't think I'd get one. You don't know what you're talking
> > about
> > > unless you've run extensive MCS on these methods with numerous
> > systems
> > > and compared them side by side. I've tested Van Tharp's stuff
and
> > > would agree that it works. But there's stuff in Jones' book
that
> > > produces better risk/reward curves. BTW, what he did with his
own
> > > account (assuming what you say is true) is irrelevant. How do
you
> > > *know* that he did it "using his own methods?" Did he have a
> viable
> > > trading system to begin with? Did he follow it? If so, which
> money
> > > management method from his book did he use and did he follow
> that?
> > > Your humble opinion, lol? This from the guy who banned Tomasz
> from
> > > his group, lol! Look Fred, if you've got nothing better to do
> than
> > > sit there and try to start a flame war, please do it with
someone
> > > else. Because you simply don't know what you're talking about
on
> > > this. Have a great day.
> > >
> > >
> > > --- In amibroker@xxxxxxxxxxxxxxx, "Fred" <fctonetti@xxxx> wrote:
> > > > LOL, right ...
> > > >
> > > > IMHO Van K. Tharp's writings on this topic are more on target.
> > > >
> > > > And in all honesty I'm not surprised that Jones traded his own
> > > account
> > > > (s) into 90+% DD's using his own mehtods.
> > > >
> > > >
> > > > --- In amibroker@xxxxxxxxxxxxxxx, "MarkF2" <feierstein@xxxx>
> > wrote:
> > > > > Well you didn't do it correctly. What simulation software
did
> > > you
> > > > use?
> > > > >
> > > > > --- In amibroker@xxxxxxxxxxxxxxx, "Fred" <fctonetti@xxxx>
> wrote:
> > > > > > Yes I have which is why I said I must be one of the
ignorant
> > > ones.
> > > > > >
> > > > > > --- In amibroker@xxxxxxxxxxxxxxx, "MarkF2"
> <feierstein@xxxx>
> > > > wrote:
> > > > > > > Have you read and tested the stuff in his book, or are
you
> > > just
> > > > > > making
> > > > > > > a typically provocative comment?
> > > > > > >
> > > > > > > --- In amibroker@xxxxxxxxxxxxxxx, "Fred"
<fctonetti@xxxx>
> > > wrote:
> > > > > > > > Ryan Jones ? OMG ... I must be one of the ignorant
ones.
> > > > > > > >
> > > > > > > > --- In amibroker@xxxxxxxxxxxxxxx, "MarkF2"
> > > <feierstein@xxxx>
> > > > > > wrote:
> > > > > > > > > Hi Leo!
> > > > > > > > >
> > > > > > > > > Let me elaborate. Although I wouldn't put $.02 on
a
> > > > *simple*
> > > > > > > > > Martingale or anti-Martingale method of money
> > management,
> > > I
> > > > do
> > > > > > think
> > > > > > > > > that the latter is certainly viable while the
former
> is
> > > > not.
> > > > > > How to
> > > > > > > > do
> > > > > > > > > better? I'd recommend reading The Trading Game by
> Ryan
> > > > Jones
> > > > > > *and
> > > > > > > > > then running simulations* of the tradeoff between
> > equity
> > > > growth
> > > > > > and
> > > > > > > > > drawdown for the various methods *for your trading
> > > > systems*. I
> > > > > > > > > developed my personal favorites after reading this
> book
> > > but
> > > > > > everyone
> > > > > > > > > needs to look at their own curves from their own
> > > > simulations for
> > > > > > > > > themselves to see what suits them best. This is a
> > > tedious
> > > > > > project
> > > > > > > > and
> > > > > > > > > not much fun, but well worth the effort in my
> opinion.
> > > > BTW, if
> > > > > > you
> > > > > > > > > look at the reviews of this book on amazon, there
are
> > > some
> > > > > > > > *incredibly
> > > > > > > > > ignorant* ones by people who obviously didn't take
the
> > > time
> > > > to
> > > > > > dig
> > > > > > > > in
> > > > > > > > > to the material and do their homework which to me,
is
> > > > running
> > > > > > > > > simulations on all of the methods. I have and
trust
> > me,
> > > > lol,
> > > > > > > > there's
> > > > > > > > > good stuff in this book.
> > > > > > > > >
> > > > > > > > > Best Regards,
> > > > > > > > >
> > > > > > > > > Mark
> > > > > > > > >
> > > > > > > > > --- In amibroker@xxxxxxxxxxxxxxx, "leonardot19"
> > > > > > > > <leo.timmermans@xxxx>
> > > > > > > > > wrote:
> > > > > > > > > > Hi Mark,
> > > > > > > > > >
> > > > > > > > > > Which MM technique would you use than, can you
give
> > an
> > > > example
> > > > > > > > > > please ?
> > > > > > > > > >
> > > > > > > > > > Kind regards
> > > > > > > > > > Leo
> > > > > > > > > >
> > > > > > > > > >
> > > > > > > > > > --- In amibroker@xxxxxxxxxxxxxxx, "MarkF2"
> > > > <feierstein@xxxx>
> > > > > > > > wrote:
> > > > > > > > > > > Neither of these is a technique I'd put $.02 on,
> > > quite
> > > > > > easily
> > > > > > > > > > > demonstrated by bootstrapping representative
> trades
> > > > while
> > > > > > > > applying
> > > > > > > > > > > them. Every time I mention simulation
everyones'
> > > eyes
> > > > glaze
> > > > > > > > > over,
> > > > > > > > > > but
> > > > > > > > > > > if you're not using it for position sizing or
> money
> > > > > > management
> > > > > > > > or
> > > > > > > > > > > whatever you want to call it, you're flying
blind.
> > > > > > > > > > >
> > > > > > > > > > > --- In amibroker@xxxxxxxxxxxxxxx, "palsanand"
> > > > > > <palsanand@xxxx>
> > > > > > > > > > wrote:
> > > > > > > > > > > > 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.
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