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Of course you did, lol.
--- In amibroker@xxxxxxxxxxxxxxx, Kevin243@xxxx wrote:
> A few years ago, I read Ryan's book and ran extensive simulations on
an Excel
> spreadsheet using a random number generator and basic trading system
> statistic, (eg. %Wins, %Loss, etc.). I used it on Stocks however.
What Steve said
> below is what I found. It will really get a small account moving,
one way or
> another. After the account grows in size (and not the other way),
the leverage
> decreases significantly until there is almost none. This is pretty
easy to
> run on a spreadsheet.
>
> I like the deterministic methods of Optimal F, however, it is
difficult and
> cumbersome to work with for the nightly chore of managing a
porfolio. If I
> had a huge portfolio and a staff of techies, then maybe it could
make it work.
>
> I'm really looking forward to getting the margin feature working in
Amibroker
> to run some portfolio simulations. I think this will be very
enlightening.
>
> Kevin Campbell
>
> In a message dated 10/30/03 2:11:38 PM Central Standard Time,
> kernish@xxxx writes:
> Mark,
>
> I looked through my emails for the last year and came up with the
following
> message. After reading his book, I asked for opinions from my research
> associates and here's a response from a large money manager (who
really trades
> hundreds of minis at a whack):
>
> "I read "The Trading Game" last weekend, and I was NOT impressed.
>
> First off, I find it remarkable that people can get so much attention
> for the radical concept of position sizing. I mean, are there that
> many people out there who don't understand that you'll make more
> profits (assuming a positive expectation) if you trade multiple
> contracts!? Jones talks like scaling your size up is a huge
> revelation.
>
> But ignoring that, I think his Fixed Ratio approach is bogus. IMO
> his entire premise is flawed: he looks at the per-contract profit it
> takes to move from 1 to 2 contracts, and he says that it should take
> the same per-contract profit to move from X to X+1 contracts. I.e.
> if you need $10k profit to move from 1 to 2 contracts, you should
> need $10k profit **per contract** to move from 100 to 101. You'd
> need $1M total profit to increase by 1 contract.
>
> I think this is flawed for 2 reasons: first, it relies much too
> heavily on the size of the contract. The entire leverage structure
> he computes would be totally different for, say, $250 SP's vs. $500
> SP's. But the big flaw is his use of additive growth instead of
> percentage growth. Moving from 1 contract to 2 isn't equivalent to
> moving from 100 to 101; it's like moving from 100 to 200! I think
> simple fixed-fractional approaches handle the position sizing much
> more logically.
>
> What really honks me off, though, is the way he cooks the books to
> make his approach look good. Fundamentally what he's doing is using
> very high leverage when the account is small, and backing off as the
> account gets big. This has the advantage that it gets the small
> account off the ground & running quickly. But it also exposes you to
> a lot more risk early on. He uses all kinds of examples to show how
> the FR approach can take a $X per contract loss with a much lower
> drawdown than FF -- but he constructs his examples so that drawdown
> happens AFTER he's scaled back the leverage. He conveniently
> neglects to mention that the FR approach would BANKRUPT you if that
> same per-contract loss happened early on with higher leverage.
>
> Add to that a host of logical and math errors, and I was SERIOUSLY
> underwhelmed.
>
> My advice would be to use a basic Fixed Fractional approach. Decide
> what leverage works for you, taking into account your risk tolerance,
> the Optimal F of your system (make sure you trade far UNDER the
> "optimal" F value), etc, and just risk a constant percentage on each
> trade. As your account grows, you may decide to back off on the
> leverage a bit. You can do all that without the Fixed Ratio
> complexities."
>
> "Extensively tested"? Isn't that what Ryan did with his own account
when he
> blew it up? Oh, maybe he sell books on fixed ratio and then goes
out and
> trades with a different style. Either way, with or without FR, he
did "blow up".
> And as John Candy used to say on SCTV: "Wow, he blew up real good."
>
> Take care,
>
> Steve
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