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Lately I've been looking at some long-term things with the SP. Trouble is
back in the early 80's the market moved maybe 1 or 2 points on a given day,
whereas today it can move 20 - 30 points with ease.
Trying to determine a realistic starting account size, I need to figure how
many contracts I really would have been buying back then. Or at whatever
time along the way.
I was thinking of calculating a "fake" margin number that would be
proportional to today's figure scaled down by the ratio of the volatilities
then versus now. Then I could tell my program to "use 30% of the starting
equity for margin" and the net profits at the end of the run would make
more sense. The way it is now, the profits seem to get bigger and bigger
trading a single contract since the price level and volatility have done so
along the way. But in reality (assuming no compounding, that's another
layer) the profits should be more approximately constant. Assuming a
constant margin investment.
It's sort of a confusing issue. Is there a basic guideline to estimate the
margin in the past? Normallized so as to compensate for the split would be
cool. Or is there a table somewhere? If anyone has any thoughts I'd love to
hear them....
Peace and tranquility be with you.
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