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Each trading system is different so I don't know how optimal f performs with yours specifically.
I wrote an article in Roy's newsletter that examined in detail a well tested trading system using a variety of money management methods including optimal f.
As expected optimal f compounded up the highest returns, but it also created drawdowns that often exceeded 80%. So the mathematical theory worked as expected but the emotional aspect of trading a system that has 80 to 90% drawdowns is extraordinarily difficult.
In addition to backtesting the trading system using various money management techniques, I also ran monte carlo tests on it to determine the range of the drawdowns. Optimal f was in the range I just mentioned. Those drawdowns matched the findings of others who have examined optimal f on a variety of trading systems.
I don't remember the exact stats of the system, but the win ratio was between 50% and 60% and the positive expectation was above 2 to 1, so it was a strong system.
The other money management techniques had drawdowns between 10% and 20% while optimal f was 80% to 90%, so it boils down to how tough a stomach someone has for handling drawdowns.
Maybe you have found a system that is so robust it doesn't encounter those kinds of drawdowns using optimal f. If that's the case, you're going to be one of the wealthiest traders on the planet within a couple of years.
Good luck with it, and don't forget to have fun.
Super
--- In equismetastock@xxxxxxxxxxxxxxx, Ticiano Rêgo <ticianorego@xxx> wrote:
>
> Super,
>
> Do you think Optimal F is not a good a good money management rule ?
>
> I´m using tradesim with a 70% win ratio and the results using Optimal F are
> phenomenal.
>
> I noticed that if I use other values the drawdown is the same averaging 27%.
> Only the finishing capital increases using Optimal F.
>
> Kind Regards,
>
>
> Ticiano
> 2009/3/30 superfragalist <no_reply@xxxxxxxxxxxxxxx>
>
> > You can't test your betting strategy in MS. You will have to use other
> > testing software.
> >
> > You are trying to use a martingale strategy. If you don't know what that is
> > look it up. Martingale is a losing strategy unless two things are present.
> > The odds of a winning bet have to be greater than 50% and the gambler has to
> > have infinite wealth. The exponential growth of the bet size across
> > consecutive losses cause a maximum adverse excursion that will bankrupt
> > anyone without an infinite size capital account, even with a 50% win/loss
> > ratio.
> >
> > I've written about this in Roy's newsletters. Maybe you can get a copy.
> > It's cheaper than the wallet whipping you're going to take using a
> > martingale system.
> >
> > But if you insist, you can get an idea of how expensive martingale systems
> > are by running a few back tests using TradeSim. Take the maximum number of
> > losses in a row, compound up the bets across the series and that will give
> > you MAE. It will also give you the final bet size before a win.
> >
> > That's where the infinite part comes in. Traders don't have infinite size
> > capital accounts. Most systems will generate one or more sets of consecutive
> > losses that will completely deplete the capital account. If you still don't
> > believe it will happen to you, run a monte carlo simulation focused on sets
> > of losses and see how many times strings occur that cause bankruptcy.
> >
> > If you like that kind of betting, then you can apply Optimal f trade size
> > to your system. At least that has a chance of paying off. And you'll get
> > just as many emotional thrills from optimal f as you would from a pure
> > martingale system, and if you have the brass to stick it out, you'll
> > eventually win before you go broke.
> >
> > Rather than spend your time reinventing a wheel that has already been
> > tested many, many times, you might consider reading a Ralph Vince and get a
> > basic education in the mathematics of trade sizing and why some systems fail
> > and others work regardless of the back test results.
> >
> > Super
> >
> >
> > --- In equismetastock@xxxxxxxxxxxxxxx <equismetastock%40yahoogroups.com>,
> > "deadlysmile01" <deadlysmile01@> wrote:
> > >
> > > So many advices against my thought of doubling the bet?
> > >
> > > But none asked about whats the system. I guess every one here is a
> > professional trader except me. My bet is that system wont give me wrong
> > ideas it correctly catches the trend, atleast the long term trends. It fails
> > in the whipsaws. Where in i double the bet.
> > >
> > > But, i am just BACKTESTING. I have not yet put the money. If the logic
> > fails ( that is double the bet size ) i will not include it.
> > >
> > > I mean c'mmon, metastock does have a performance sheet thingy? Right?
> > >
> > > So, please, pretty please, kindly provde me the formula on how to do the
> > doubling logic in metastock system tester.
> > >
> > > Thanks all..you all been great. :)
> > >
> > > --- In equismetastock@xxxxxxxxxxxxxxx <equismetastock%40yahoogroups.com>,
> > Code 2 <Code2@> wrote:
> > > >
> > > > Nope, failure is guaranteed. That's simply a mathematical fact.
> > > > Assume that your system guarantees a loss of no more than 10% of your
> > > > bet size and you double your bet after each loss. Even with an
> > > > initial bet size of just 2% of your account, you'll be out of business
> > > > after only six consecutive losses. With an initial bet size of 3%,
> > > > you'll be dead after five consecutive losses. That doesn't even allow
> > > > for the occasional Black Swan where the market blows through your stop
> > > > and causes a loss of more than 10%.
> > > >
> > > > Even a great trading system will yield five or six consecutive losses
> > > > every once in a while.
> > > >
> > > > Martingale bet sizing does not work in Las Vegas and it does not work
> > > > in the markets. You have to get smaller after each loss.
> > > >
> > > >
> > > >
> > > > From: thomas12ng <thomas12ng@>
> > > > To: equismetastock@xxxxxxxxxxxxxxx <equismetastock%40yahoogroups.com>
> > > > Date: Saturday, March 28, 2009, 3:21:20 AM
> > > > Subject: [EquisMetaStock Group] Re: Hi all - Help Need .
> > > >
> > > > depends on your system dude! and it depends on your personality and
> > > > your perception about this system
> > > >
> > > > if your system loss 20% of 100% total trade then your method is
> > > > perhaps will claim back all the losses
> > > >
> > > > but if the system keeps trigering at the down trend even the father of
> > > > super martingale can find him self sleeping at his neighbour garage in
> > > > the next morning :)).
> > > >
> > > > my suggestion is that
> > > >
> > > > 1. just cut and paste your system logic into indicator builder and
> > > > see whether the signal correct and suit your personality
> > > >
> > > > 2. avoid pyramiding and see how your system goes
> > > >
> > > > 3. just ask your self about your system. was the system signal is
> > > > purely from you or someone who only know a slight coding method and
> > > > admit him self as a "coach or even trading guru" offer you this
> > > > system. I did experiencing this condition before. when I ask him
> > > > back whether you know what the system picks he was just smurking. at
> > > > that time I was so angry and knew has been deceived. felt like I was
> > > > going to smash his head by a base ball stick. since then I never
> > > > trust anyone before my eyes see it
> > > >
> > > >
> > > >
> > > > --- In equismetastock@xxxxxxxxxxxxxxx<equismetastock%40yahoogroups.com>,
> > "Patrick Butler" <pat494@> wrote:
> > > >
> > > > > Hi,
> > > > > You are just about to make one of the worst mistakes in trading imho
> > > > > - that of doubling down !
> > > > > You will get away with it a few times and feel pretty confident but
> > > > > when it doesn't work out as will be the case it will eat a large
> > > > > hole in your capital ! Accept this advice of an old trader and save
> > > > > yourself a blown up account
> > > > > regards
> > > > > Pat
> > > >
> > > >
> > > >
> > > > > ----- Original Message -----
> > > > > From: deadlysmile01
> > > > > To: equismetastock@xxxxxxxxxxxxxxx<equismetastock%40yahoogroups.com>
> > > > > Sent: Thursday, March 26, 2009 9:39 AM
> > > > > Subject: [EquisMetaStock Group] Hi all - Help Need .
> > > > >
> > > > > Hi all,
> > > > >
> > > > > I am backtesting a system where whenever i go wrong ( i.e. if the
> > > > > trade results in a loss) i double the size of the bet.
> > > > >
> > > > > So i need to modify the entry size under the Buy order / sell
> > > > > order tab, i tried using Simulation.CurrentPositionPerformance, and
> > > > > Simulation.CurrentPositionSize which resulted in an error.
> > > > >
> > > > > Can someone please help in that.
> > > > >
> > > > > Thanks.
> > > >
> > > > --
> > > >
> > >
> >
> >
> >
>
------------------------------------
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