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Yes, I did notice it. But it was still in the same paragraph where it
appeared as though you were endorsing martingale betting. I guess I don't
understand what circumstances would warrant its 'rare' use. What do you mean by
"...when the nature of the signal warrants it"? In my opinion, one should choose
a certain MM approach and stick to it.
AV
----- Original Message -----
<BLOCKQUOTE
>
<DIV
>From:
palsanand
To: <A title=amibroker@xxxxxxxxxxxxxxx
href="">amibroker@xxxxxxxxxxxxxxx
Sent: Thursday, October 30, 2003 7:25
PM
Subject: [amibroker] Re: Managing
drawdowns (was % channels)
I agree, that is why I said I use martingale method only
very rarely, i.e, only when the nature of the signal warrants it....
Maybe you did not notice it or understand the significance of
it...rgds, Pal--- In <A
href="">amibroker@xxxxxxxxxxxxxxx, "Al
Venosa" <advenosa@x...> wrote:>
Pal:> > Martingale betting will kill you regardless of your W/L
ratio. You mentioned trend-following systems. Such systems notoriously
have a winning percentage less than 50%, usually around 40-45%. So, when
you have a moderately large losing percentage (55 to 60% or more), the
probability of your experiencing 5 or 6 or 7 losses in a row is
moderately high (0.6^6 = 4.7%). It makes absolutely no difference what
your W/L ratio is. It could be 10:1. But if you double your bet size every
time you lose, you lose big time if you don't get that one big 10x win
inbetween. Conversely, it makes eminent sense to increase your bet size as
you win. After all, you can look at it as betting the market's money
rather than your own. If you continue to keep your risk percentage
constant but increase the percentage of profits you risk on each trade,
your winnings will compound enormously. In other words, risk 1% of your
capital on all bets but if your profits increase by, say, 10%, risk 5% of
the profits plus your normal 1% of current capital. You'll make big money
without increasing your real risk. And if you lose, you LOWER your bet
size, not raise it. That way, you stay in the game in case you experience
a run of losses. > > Al Venosa> -----
Original Message ----- > From: palsanand
> To: amibroker@xxxxxxxxxxxxxxx > Sent:
Thursday, October 30, 2003 6:35 PM> Subject: [amibroker]
Re: Managing drawdowns (was % channels)> > >
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 ...> >
> > > <A
href="">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:> >
> > > > > > > > > > > >
> > > > > > > > > > > > <A
href="">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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