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John,
I read the post from RealTraders list and I guess I'm going to have to do
some more work on this. I thought I could delegate it to my brother, but I
have figured out I need to know more. We have several years of trades (real
ones) that include real profits and real losses, so I suspect I'll be able
to utilize these as input into any calculations. You might remember, we had
a few killer losses (2 in the last 8 months alone) that would have wiped us
out in the past. Using our current system, we recovered nicely and have
subsequently built up some substantial capital.
I tried to figure out that one about the Kelly system:
"In the data on page 2, we had 12 wins and the average winning trade
made $1444; we had 11 losses, and the average losing trade lost $501.
Therefore p = 0.52 (12 winning trades divided by 23 total trades), and
r = 2.88 (1444 divided by 501). This yields 35% as the amount to risk.
That is one should put about one third of his speculative funds into
each of our speculative recommendations, if he believes that our
recommendations will continue to profit at the same rate shown in
the table on page 2."
I just looked at it quickly, but didn't see how he calculated 35% as the
amount to risk.
I'm not sure I agree with either the Monte Carlo approach since I don't
believe we're working with a random application of numbers. We're using
that fixed amount to risk provided by the Balsara book but until I read it I
won't know if it's opt f or something else.
If someone has an opt f XL spreadsheet that I could insert my input into,
I'd appreciate hearing from them.
Thanks,
Guy
Paranoia...you only have to be right once to make it all worthwhile!
-----Original Message-----
From: owner-metastock@xxxxxxxxxxxxx [mailto:owner-metastock@xxxxxxxxxxxxx]On
Behalf Of John Manasco
Sent: Sunday, July 09, 2000 4:55 PM
To: metastock@xxxxxxxxxxxxx
Subject: Re: Risk of ruin, amount per trade formula?
Guy
I don't know anything about the Balsara book. Actually I don't know anything
about Ralph Vince's book either, I just read other peoples mail <g>. I'm
going to forward a post from the Realtraders list shortly that has some
interesting discussion of optimal f and other position sizing systems.
John Manasco
----- Original Message -----
From: Guy Tann <grt@xxxxxxxxxxxx>
To: <metastock@xxxxxxxxxxxxx>
Sent: Saturday, July 08, 2000 4:42 PM
Subject: RE: Risk of ruin, amount per trade formula?
> John
>
> Here I come from a basis of ignorance again, but is the Balsara book and
> charts we're using based on Optimal f? I'll have to ask my brother as I
> haven't received my copy yet. All I can say is, if it is, it appears to
be
> working for us since we've weathered two major losses without a problem
and
> are currently building some substantial equity positions. Granted, the
only
> thing we've done is reduce our investment to 33% from 50%. It has made a
> significant difference.
>
> Guy
>
> Paranoia...you only have to be right once to make it all worthwhile!
>
> -----Original Message-----
> From: owner-metastock@xxxxxxxxxxxxx
[mailto:owner-metastock@xxxxxxxxxxxxx]On
> Behalf Of John Manasco
> Sent: Saturday, July 08, 2000 4:57 AM
> To: metastock@xxxxxxxxxxxxx
> Subject: Re: Risk of ruin, amount per trade formula?
>
> I wish some of you guys would get on the Realtraders forum. They recently
> had a fairly lengthy discussion on the optimal f formula and came to the
> conclusion that it was not only worthless it would almost guarantee ruin
if
> implemented at the wrong time. But the better conclusion is to join the
> Realtraders discussion forum as they have some very bright professional
> traders who like to share their knowledge.
>
> John Manasco
>
> ----- Original Message -----
> From: Guy Tann <grt@xxxxxxxxxxxx>
> To: <metastock@xxxxxxxxxxxxx>
> Sent: Saturday, July 08, 2000 1:38 AM
> Subject: RE: Risk of ruin, amount per trade formula?
>
>
> > Thanks Glen.
> >
> > While all three of us have backgrounds in math, statistics and
economics,
> we
> > really haven't spent the time necessary to dive into Vince's books. I
> think
> > that's why my brother took the easy way out and went with Balsara's
> charts.
> > :)
> >
> > Guy
> >
> > Paranoia...you only have to be right once to make it all worthwhile!
> >
> > -----Original Message-----
> > From: owner-metastock@xxxxxxxxxxxxx
> [mailto:owner-metastock@xxxxxxxxxxxxx]On
> > Behalf Of Glen Wallace
> > Sent: Friday, July 07, 2000 6:49 PM
> > To: metastock@xxxxxxxxxxxxx
> > Subject: Re: Risk of ruin, amount per trade formula?
> >
> > To add to Guy's comments, Ralph Vince's first book, "Portfolio
Management
> > Formulas," has a comprehensive chapter on risk of ruin. His second
book,
> > "The
> > Mathematics of Money Management," contains a condensed version of his
> first
> > book in the first chapter, but glosses over risk of ruin. Both are
> > excellent
> > books and easily the most important books in my bookshelf. They are
not,
> > however, for the mathematically challenged.
> >
> >
> > ----- Original Message -----
> > From: "Guy Tann" <grt@xxxxxxxxxxxx>
> > To: <metastock@xxxxxxxxxxxxx>
> > Sent: Friday, July 07, 2000 5:20 PM
> > Subject: RE: Risk of ruin, amount per trade formula?
> >
> > > Sonny and Mike,
> > >
> > > I made an error here. We bought the following books from Amazon.com:
> > >
> > > The new Money Management by Vince
> > > The Mathematics of Money Management by Vince
> > > Money Management Strategies for Future Traders by Balsara
> > >
> > > The "Risk of Ruin" chart we're using came from the Balsara book
> (according
> > > to my brother). I'm ordering my own copy.
> > >
> > > I'm sorry if I misled anybody.
> > >
> > > Guy
> >
> >
> >
>
>
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