|
PureBytes Links
Trading Reference Links
|
Your data on the small cap market is historically sound, no question.
However, there are many methods of trading. Each method of trading has
a probablity of wins and losses. The small cap market might out
perform the large cap market but within the small cap market different
systems perform at different retes and have differing degrees of
expectation.
There are maybe 10 money management--position sizing--formulas that
are commonly used. Some are impacted by the probability of wins and
losses, some are based on fixed shares or dollars and some are based
on capital account risk only.
Each of those methods should be tested with the entry and exit formula
which is going to be used on whatever market one trades.
The tests should be performed like any other systems test with in
sample and out of sample data with the only variable being the money
management technique applied.
If the system tests at say 10% annually (hypothetical) with no money
management formulas except fixed size, the the annual performance will
change and sometimes dramatically when the other money management
formulas are used in place of the traditional fixed size trade.
None of the that can be determined by looking at a chart.
The method used as a base for the position sizing formula I posted
usually tests out very well, regardless of the system someone is
using. I'm not basing that on my tests only. Other systems developers
have found similar results. However, since every system is different,
each person should run their own tests.
As an example, I've seen a number of systems that test at say 10%
annually with fixed size positions, jump to 20% with the correct money
management formula added to it.
I wish I could simply look at a formula on a chart and conclude it's
no good. It would save a lot of time and energy, not to mention
frustration. Testing is hard work. However, the consequences of not
testing are very expensive.
Yahoo! Groups Links
<*> To visit your group on the web, go to:
http://groups.yahoo.com/group/equismetastock/
<*> To unsubscribe from this group, send an email to:
equismetastock-unsubscribe@xxxxxxxxxxxxxxx
<*> Your use of Yahoo! Groups is subject to:
http://docs.yahoo.com/info/terms/
|