|
PureBytes Links
Trading Reference Links
|
optimal_f and fix fractional is nothing but a
20/20 hindsight heresy. another way of
curvefitting profit based on size traded,
and selling books at same time.
size that you trade is a functon of risk reward
and nothing else. mathimatically
given enough variables and rules you can curve
fit just about anything to anything. one price
series to another market to lakers etc.
including money managment rules...
what is important is what your RISK is
and secondary what your reward is.
less risk more reward put on some more.
when csco hit 50 1/16 the risk was very small
compared to potential reward. whoever loaded up
on it around 50 had no or little risk and now ripping the reward.
same thing for other trades....
bilo.
risk is the main variable.....
----- Original Message -----
From: M. Simms <prosys@xxxxxxxxxxxxxxxx>
To: Dennis Holverstott <dennis@xxxxxxxxxx>; <omega-list@xxxxxxxxxx>
Sent: Sunday, June 11, 2000 4:25 PM
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
> >
>
>
|