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At 08:37 AM 9/10/98 -0600, you wrote:
>All of the posts recently about optimal f have reinforced what I have heard
>in the past:
snip
>Among these other works that may be worthy of your investigation and
>understanding are:
>
>1. Ryan Jones' Fixed Ratio ideas
>
>2. Rina Systems' Secure f variant (See July98 TASC)
>
>3. Sunny Harris' Ultimate f variant
>
>I hope this might be helpful to someone on the list.
>Neil
The 'variants' reduce the high 'risk of ruin' associated with conventional
optimal f application and make Ralph Vince's f concept more practical to
implement in actual trading.
Some high win ratio mechanical trading models can, according to conventional
optimal f, call for +80% of the available trading capital to be bet on each
trade. Unfortunately two or more outlier trades can in those circumstances
quickly break the bank and that's the main complaint about the non-variant
applications.
The distribution of likely trades in most trading models is not that
predictable, so most users will take the optimal f calculation and simply
apply a fractional percentage, like say 30%, then use that scaled down
version to actually trade with, in order to reduce risk of ruin. The
variants 2 & 3 mentioned above are more sophisticated methods of
accomplishing the same objective.
Michael Paauwe
mpaauwe@xxxxxxxxxx
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