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At 02:47 PM 6/12/00 EDT, Chuck LeBeau wrote:
>n a message dated 6/12/00 10:49:09 AM Pacific Daylight Time,
>byoneoka@xxxxxxxxxxxxx writes:
>
><< so these considerations: we can't/shouldn't try to forecast the market
> {implicit in choosing to trade a given system}, we never know when a market
> meltdown will occur, and we can choose the priority of trading to manage
> risk--all argue against constant bet size under drawdown and for asymmetric
> money management.
>
> regards,
> brad yoneoka >>
>
>
>Brad, I agree with most of what you said. A very informative post. (I'm
>not sure your post made it to the list so I am pasting the full text below
my
>reply.)
>
>However, what happens if the market meltdown you refer to occurs when you
>have substantially increased your bet size? Isn't that really the worst
case
>scenario?
>
>Seems to me that we both agree that we don't know when the meltdown will
>occur. But isn't this in fact an argument for a constant bet size that will
>not have us risking too much just before the meltdown?
>
>Chuck LeBeau
>traderclub.com
>
Chuck-
I can give a real-world example. We trade a bond system using a faster rate
of decrease than increase. We had a very nice run-up last year which took
us from a one lot to a nine lot. Then the meltdown occured and the system
exceeded its historical max DD by a factor of 2. We still had a profit in
the acct because we decreased rapidly back down to a one-lot. Without the
faster decrease, or worse yet, with no decrease, the acct. would have gone
very negative.
rich
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