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If Russell Sands can be believed (and members of this
email list have advocated both the affirmative and the
negative position), the original classroom training
of the "Turtles", lectured by Richard Dennis and
William Eckhardt, directly addressed this issue.
According to the book Sands sold (sells?) for $2.5K
and which appears to be "the notes" from the Turtle
schooling, there was a rather cute rule for Turtle
trading that they called "switches".
* There was an upper limit on "portfolio heat";
when open risk was > X% of total equity, you
couldn't take any more risk.
* BUT, if you got a new signal and you were at the
portfolio heat limit, you were supposed to EXIT
your weakest position and then take the new signal.
{in general if you got K new signals, exit your
weakest K positions and take all K of the new signals}
Notice that this rule has keeps you in strong trades
where strength is based upon *current* (rather than
*historical*) measures. I'd rather not violate the
NDA by disclosing their particular heat-limit or
their particular strength metric.
Notice also that it obey's Eckhardt's rule for
"robust statistics": don't jack around with weightings
and finesse. If a market's worth trading at all,
it's worth trading at full size. Binary: in or out.
Another way the Turtles managed to have big positions
in "good" trades was by what they called "pyramiding":
when a position moves in your favor, add more contracts.
If it moves further in your favor, add yet more. Others
call this "scaling into a position". Again this is
based on *current*, not *historical*, strength.
If you wanna learn more, spend the $2.5K buxx. In my
opinion, it is a good value. For example, I wouldn't
part with *my* copy for less than $15K. But you and
I are different people; perhaps your opinion differs.
-- Mark Johnson
> Date: Sun, 9 May 1999 08:11:07 -0500
> From: "Peter W. Aan" <paan@xxxxxxxxxxxxxx>
> To: omega-list@xxxxxxxxxx
>
> Request for comments and opinions:
>
> There is one aspect of money management (determining # of contracts to
> trade) that seems to be rarely, if ever, discussed. Let's say that you
> have a system that you wish to employ on a diversified group of market
> (10-15+). You've done your testing, and naturally you find that the system
> works significantly better on some markets than others.
>
> Do you adjust your money management formula to trade "good" markets more
> heavily that the "mediocre" ones?
>
> Peter W. Aan, CTA
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