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I am not a money management expert but what you just described is defined by
expectation
which is calculated as:
EV=P(W)*Win - P(L)*Loss
P(W) and P(L) = probability of Win and Loss respectively
Win = amount you will Win
Loss= amount you will lose.
It basically says that you can take trades that are lower probability as
long as they win
a larger amount.
-----Original Message-----
From: M. Simms [mailto:prosys@xxxxxxxxxxxxxxxx]
Sent: Sunday, June 11, 2000 4:26 PM
To: Dennis Holverstott; omega-list@xxxxxxxxxx
Subject: RE: More optimal_f and fixed fractional
Yeah but for the additional "risk", we had an "opportunity" to triple our
money.....
which in fact occurred in the 2nd trial.
Risk and Reward are correlated and that applies especially to money
management schemes.
Ryan Jones said this in his book as well.
BTW: I would have stopped after hitting that triple ;)
> -----Original Message-----
> From: Dennis Holverstott [mailto:dennis@xxxxxxxxxx]
> Sent: Sunday, June 11, 2000 12:40 PM
> To: omega-list@xxxxxxxxxx
> Subject: More optimal_f and fixed fractional
>
>
> Here's a more extreme version of the example Chuck LeBeau presented in
> his traderclub bulletin. Let's flip a coin 10 times with 5 winners and 5
> losers. You either win or lose the amount you bet. Should break even,
> right? Not if you use the fixed fractional method. We'll start with $100
> and bet 25% (similar to optimal_f for some systems) of our account on
> each flip.
>
> Bet Trade Balance
> start $100.00
> $25.00 lose $75.00
> $18.75 lose $56.25
> $14.06 lose $42.19
> $10.55 lose $31.64
> $7.91 lose $23.73
> $5.93 win $29.66
> $7.42 win $37.08
> $9.27 win $46.35
> $11.59 win $57.94
> $14.48 win $72.42
>
> Bet Trade Balance
> start $100.00
> $25.00 win $125.00
> $31.25 win $156.25
> $39.06 win $195.31
> $48.83 win $244.14
> $61.04 win $305.18
> $76.29 lose $228.88
> $57.22 lose $171.66
> $42.92 lose $128.75
> $32.19 lose $96.56
> $24.14 lose $72.42
>
> Bet Trade Balance
> start $100.00
> $25.00 win $125.00
> $31.25 lose $93.75
> $23.44 win $117.19
> $29.30 lose $87.89
> $21.97 win $109.86
> $27.47 lose $82.40
> $20.60 win $103.00
> $25.75 lose $77.25
> $19.31 win $96.56
> $24.14 lose $72.42
>
> Our money management turned a breakeven system into a loser.
>
> --
> Dennis
>
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