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Eric,
Position sizing controls the profit vs. maximum drawdown of your
trading system. Each trader is unique in the amount of DD you can
handle. Here are 2 examples:
Aberration Plus is a well known commodity trading system. Here is the
system performance vs profit vs average DD.
PosSize as % Return Avg DD
% of equity
1 32.8 18.5
2 65.2 29.7
3 96.1 36.2
4 125.4 42.1
5 153.1 47.0
Here is a stock trading system I developed and use
PosSize as % Return Max % DD
% of equity
2 13.74 2.64
7 56.26 3.62
12 28.79 2.80
17 36.66 3.38
20 32.39 7.44
I have traded the Aberration+ system with about $300K at the 2% risk
level and have experienced the stated gains and DD's. I currently
trade the second system at the 9% PS level which has much lower
returns, but I can sleep soundly each night.
My suggestion is you need to look into your own personality and decide
what your tolerance for risk is. Unfortunately this self analysis
doesn't work very well - what you really need to do is to pick some
system, then start trading it with your life's savings and actually
experience those gains and DD's - that way you will find out what you
are comfortable with.
Reef-Break
-5-- In equismetastock@xxxxxxxxxxxxxxx, chichungchoi <no_reply@xxx> wrote:
>
> Does anyone would like to share any idea on how to select the trading
> strategies based on expectancy vs money management?
>
> For comparing strategies, I always select the one with highest
> expectancy, but when I also need to consider position sizing into the
> selection criteria, then I don't know what to do?
>
> Does anyone know on how to balance between expectancy and money
> management [the size of position] in order to select the best strategy
> for trading?
>
> Thank you for any suggestion
> Eric
>
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