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Also, I might add that I do not use Volatility to adjust my position
size, I use Volatility (Low, Medium or High) to filter the type of
signals I trade.
For e.g., if the Volatility is Low, I have a wider choice of signals
to trade and if the Volatility is Medium or High, I have a much
narrower range (stronger signals: typically trend-changes or swing
trades classified as superbuy or supersell).
For continuation signals, Volatility doesn't matter, but momentum
does. Typically, one would find that momentum decreases across time-
frames (consensus) when there is a dip/rally in an
uptrend/downtrend...
rgds, Pal
--- In amibroker@xxxxxxxxxxxxxxx, "palsanand" <palsanand@xxxx> wrote:
> Yes, I knew that. I would still not use any standing stops on day
of
> entry, and use only mental stops.
>
> rgds, Pal
> --- In amibroker@xxxxxxxxxxxxxxx, "Ken Close" <closeks@xxxx> wrote:
> > Pal, thanks, interesting calculations. I assume you realize MFs
> trade
> > only at the close and "showing your hand" is not an issue. The
only
> > real issue is trading too frequently and getting penalized and/or
> banned
> > from trading the fund in the future. I assume you know this.
> >
> > Thanks again,
> >
> > Ken
> >
> > -----Original Message-----
> > From: palsanand [mailto:palsanand@x...]
> > Sent: Monday, December 01, 2003 8:27 PM
> > To: amibroker@xxxxxxxxxxxxxxx
> > Subject: [amibroker] Re: Mutual Fund Money Management
> >
> > Assuming your usable_margin is the same as the total equity when
> you
> > start your trading, ie., $50,000.00, the
> >
> > AVAILABLE_EQUITY(AE) = 0.1 * USABLE_MARGIN (UM);
> > available_equity = 0.1 * 50000.00 = $5000.00;
> >
> > If you determine your Max_System_%_DD or Max_Trade_%_DD using AB
> Back
> > testing or MCS as 20% = 0.2
> >
> > POSITION_SIZE (PS) = AE / MAX_DRAWDOWN_% = 0.1 * UM / 0.2 = 0.5 *
UM
> >
> > Position_Size = 0.1 * $50,000.00/0.2 = $25,000.00
> >
> > If you want to trade 3 MF's, then you would invest $8,333.00 per
MF.
> >
> > Enter at opening range and/or at support/resistance depending on
> > where the current price is at. This automatically takes care of
> the
> > volatility. Mental Stops on day of trade at 1 full point away
from
> > entry. Never reveal your positions. Exit after 20 minutes only
if
> > your mental stop is hit and you are still losing. Never show
your
> > stop on day of entry as this is equivalent to showing your hand
in
> a
> > poker game and the specialist's would view that with glee. Use a
> > 3BSMA stop from next session onwards.
> >
> > rgds, Pal
> >
> >
> >
> > --- In amibroker@xxxxxxxxxxxxxxx, "Ken Close" <closeks@xxxx>
wrote:
> > > Excuse me for asking a potentially dumb question, but what are
> some
> > > "accepted" rules of thumb for money management AFA mutual funds
> are
> > > concerned.
> > >
> > > I can see that you might risk say 2%, on a position, and know
> what
> > your
> > > stop loss would be, and then divide the price per share of the
> fund
> > by
> > > the loss level to approximate the number of shares to buy.
> > >
> > > But what about some of the other rules of thumb, like do not
risk
> > more
> > > than 3% of total equity on a position. Or does this apply to
the
> > stop
> > > loss? Seems like 3% might be a small (too small?) amount for a
> > mutual
> > > fund position. I do not know. It depends on the size of your
> > portfolio
> > > of course. What if you have a $20,000 portfolio? What if you
> have
> > a
> > > $2,000,000 portfolio. A $60,000 MF purchase out of a $2M
> portfolio
> > does
> > > not "seem" to be the right "proportion", or is it?
> > >
> > > Also, what about the inherent volatility reduction that occurs
> with
> > the
> > > multiple stocks in a fund?
> > >
> > > What about the number of funds to own at a single time? How
> would
> > you
> > > go about figuring this out, given high correlation among the
> funds?
> > > ....or given low correlation among the funds?
> > >
> > > Is it better to divide a given amount (say $100K) among two
> similar
> > > funds ($50K each) ,or is it better to plunk the entire amount
> into
> > the
> > > one fund? Would you increase the number of different funds given
> > > increasing size of total portfolio funds?
> > >
> > > Again, maybe a whole series of dumb questions but what do some
of
> > you
> > > more experienced money management folks have to say for this?
> > >
> > > Thanks,
> > >
> > > Ken
> >
> >
> >
> > Send BUG REPORTS to bugs@xxxx
> > Send SUGGESTIONS to suggest@xxxx
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