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--- In amibroker@xxxxxxxxxxxxxxx, "brian_z111" <brian_z111@xxx> wrote:
>
> --- In amibroker@xxxxxxxxxxxxxxx, "gruntusnomore" <gruntus@> wrote:
> >
> > Can't get my head around exposure percentage.
> >
> > In an old list post Tomasz wrote:
> > Single bar exposure is: Value of all currently open positions /
Total
> > Equity (where total equity is value of all open positions plus all
> > available funds).
> >
> > Now this single bar exposure is summed up for all bars and
divided by
> > number of bars to get system exposure. Exposure is always in the
range
> > of 0..100%.
> >
> > In ab appendix example in Howard's book he notes:
> > The exposure - the time a system is in a position..
> >
> > So does the metric refer to time or equity or both? Can someone
help
> > with an example or two?
> >
>
>
> 'Exposure', as defined by Tomasz (or something similar), should be
used
> in evaluation where a MEASURE of exposure is required.
> As a metric, exposure quantifies risk (technically speaking risk
should
> always be reduced to a number). It isn't so much an absolute as a
> relative measure (this is sufficient provided a constant method is
> applied to the investments you are comparing).
>
> In Tomasz'z method the ratio of the % portfolio invested/time in
the
> market is the metric. Using one year as the example and assuming
your
> time in trade is only one day. If you invest the same amount each
time
> but do so less frequently then the numerator (the annual sum of
your
> investments) is smaller while the denominator is constant so your
> exposure is reduced and vice versa.
>
> You can then use your exposure as a Risk/Reward metric.
>
> If two systems have the same PA% return but one has a lower %
exposure
> then it is a superior investment (if maximizing PA%/%exposure is
your
> chosen objective).
>
> BASIC EXAMPLE:
>
> If you invested 100% of your portfolio (capital) every day for a
year
> and you returned 15% PA your exposure would be:
>
> (250 bars * 100%)/250 bars per year == 100%
>
> (the investment could be divided into 10 'trades' of 10% of your
> portfolio - it doesn't matter - it is the total investment per bar
> expressed as a % of portfolio that counts).
>
> Your Return/Risk metric would be 15/100 == 15% (exactly what you
would
> expect since you were fully invested and returned 15% PA.
>
> Indirectly it is a measure of 'opportunity cost' - if you can
achieve
> 15%PA and you are only in the market half of the time then you can
> invest somewhere else during the 'out of market period'.
>
> Brian_z
>
P.S. If the percentage of your capital invested is a constant e.g.
you are always 100% invested, then %exposure is proportional to time
in the market (so Howard is correct too).
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