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:Scott, This sounds like it may be a great idea but I don't have a
:clue as to how to treat a system as a transformation of raw price. I
:sure would appreciate an example and / or clarification.
One way of using money managment: If you have a smooth equity curve (see
attached GIF), and you can trade multiple contracts, when you see a
retracement on the equity curve, increase your positions in the original
direction of the trade. I.E., my system has historically goes against me by
10 points one third of the time before it reverses direction and goes in my
favour (if it goes against me by 13 points, I know it will never reverse and
go again in my favour. So I get out). So what I do is increase my position
when it goes 10 points against me and then get out (of both positions) if
it goes 13 points against me from my original entry. This reduces my average
entry price and results in another 40% ROA.
::Here's a clue for you. Treat a system as a transformation of the
::raw price series. In futures, other than equity contracts, the raw
::price series goes up and down. If your system has an edge, then the
::transformed price series should be gradually upward sloping, like a
::the long term chart of the stock market. Now treat the transformed
::price series as an asset class and mix them altogether via MPT and
::presto, your can get some great stuff like I have.
Attachment Converted: "c:\eudora\attach\snap310.gif"
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