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On Thu, 1 Jul 1999 17:57:32 -0400, you wrote:
>Spreadsheet for optimalf from Futures Mangazine attached.
Ed, thank you very much for posting the Excel sheets on Optimal f
calculation from Futures Magazine!
Even if I have to look more into the details of the procedure to get
the idea behind the sheets: Can you (or someone else) give some hints
about the general outline of the Optimal f method?
My first impression is:
Based on a test set of "historical" data, a probability distribution
for wins & losses is constructed, which reflects the capabilities of
the trading system and the characteristics of the market under
consideration. From this, the result for new investments is estimated,
but how is this done? - What is (in simple words) the criterion to
select an optimal re-investment factor?
Some general remarks on the Optimal f method:
Seemingly, it follows the approach, that there is no other information
about risk than "historical" trades. Imo, this is not true in
general, especially when it comes to well-known side effects e.g. from
political events, etc.
Additionally, rapid market changes cannot be condensed easily in
"historical" data. So this "historical" approach has some general
drawbacks, imo.
Finally, the trading system (like mine) often gives a basic estimate
for something like "risk" for every upcoming trade, and I would like
to combine this "known risk" with the "statistical risk" (like used in
the Optimal f method) for my money management. - Any pointer in this
direction?
mfg rudolf stricker
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