|
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.
--- In Metastockusers@xxxxxxxxxxxxxxx, "superfragalist"
<jackolso@xxxx> wrote:
> Here's a series of money management articles that will explain a
> variety of techniques for position sizing, etc.
>
> http://members.aon.at/tips/moneyMan1.htm
>
> If some of you want to learn about money management, read these and
> then look at the code I posted.
>
> Others may prefer to forget the education and just post their opinions.
>
>
>
>
>
>
>
>
>
>
>
>
> --- In Metastockusers@xxxxxxxxxxxxxxx, "superfragalist"
> <jackolso@xxxx> wrote:
> > DM, this is strictly for entry sizing. Exit timing and amounts are
> > another topic altogether.
> >
> >
> >
> >
> > --- In Metastockusers@xxxxxxxxxxxxxxx, "eastwind987" <dm999@xxxx>
wrote:
> > > Superfragalist,
> > >
> > > What a wonderful formula you gave us! The key to making money in
the
> > > stock market is knowing how to manage risk and reward, and your
> > > formula makes it easy. The Turtles used ATR(14) combined with a
> > > calculation for the value of a futures contract; but I never
> > > translated that calculation to stocks.
> > >
> > > Do you use this formula to tell you when to adjust your position
in a
> > > stock? In other words, do you sell half of the position when
the ATR
> > > gets to a certain point, which would re-balance the risk?
> > >
> > > I already subscribe to Roy's letter, and look forward to every
issue.
> > >
> > > dm
> > >
> > > --- In Metastockusers@xxxxxxxxxxxxxxx, "superfragalist"
> > > <jackolso@xxxx> wrote:
> > > > I have been accused of promoting Roy's newsletter. That
accusation
> > > is
> > > > alleged and the merit as yet undetermined. Without admitting or
> > > > denying anything, if it sounds like I promote the newsletter, it's
> > > > because it's such a good MS tool that I think every MS user
should
> > > use
> > > > it.
> > > >
> > > > In fact, Equis should give everyone who purchases MS a free
one year
> > > > subscription. (I'm sorry, I lost my head for a minute. I know
that's
> > > > just being too rational.)
> > > >
> > > > However, unlike Equis I don't ignore the users and what they
need to
> > > > be successful. So as a gift to everyone who subscribes to Roy's
> > > > newsletter THIS MONTH, I'm going to give you a terrific position
> > > > sizing indicator that calculates the number of shares of a
> > > particular
> > > > stock that you should buy based on your personal risk profile and
> > > the
> > > > volatility of the stock.
> > > >
> > > > This is a powerful tool for position sizing, so don't ignore it.
> > > Test
> > > > it out and see if it improves your returns. It's based on sound
> > > theory
> > > > of money management.
> > > >
> > > > CapitalAccount:=Input("Size of Capital
> > > Account",5000,10000000,100000);
> > > > RiskPercent:=Input("Account Risk Tolerance in
> > > Decimals.",0.001,100,0.01);
> > > > {This is the amount of your account balance you're willing to
lose
> > > per
> > > > trade-- 0.01 equals 1%.}
> > > > VT:=Input("ATR Periods for Calculating Volatility.",1,100,10);
> > > > Bars:=Input("Number of Bars for Smoothing ATR.",2,100,10);
> > > > WhimpFactor:=Input("Personal Risk Profile-1 Cowboy to 7
> > > Whimp",1,7,3);
> > > > {1 means you ride bulls and live hard, 7 means you're Mister
> > > > Rogers--most people fall in between.}
> > > > x:=Mov(ATR(VT),Bars,S);
> > > > RiskPercent*CapitalAccount/(x*WhimpFactor)
> > > >
> > > > Plot this on the chart and read the shares to include in your
> > > > portfolio at the current price.
> > > >
> > > > Yes, I know I'm giving it to you before you subscribe. I work
off of
> > > > the honor system, so I know that everyone who reads this will
honor
> > > > the deal and sign up. This one indicator alone is worth the
price.
> > > >
> > > > www.metastocktips.co.nz
> > > >
> > > > I know who's being naughty and nice, I'm making a list and
counting
> > > it
> > > > twice. So look out, Christmas is coming. It's not a good time
to be
> > > > breaking the honor code. Okay!
Yahoo! Groups Links
<*> To visit your group on the web, go to:
http://groups.yahoo.com/group/Metastockusers/
<*> To unsubscribe from this group, send an email to:
Metastockusers-unsubscribe@xxxxxxxxxxxxxxx
<*> Your use of Yahoo! Groups is subject to:
http://docs.yahoo.com/info/terms/
|