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Bob - again, regarding....
"You will find that with many systems the TradeRisk varies significantly
from trade to trade"
1) How do you determine this (TradeRisk) ? A "Scoring system" (1->10) ???
2) What is used to develop the scores ?
- stochastics ?
- % above/below moving average
- ?????
3) How do you profile a trade position before getting into it ?
Are you saying that TradeRisk varies but we cannot measure it APRIORI ?
> -----Original Message-----
> From: Bob Fulks [mailto:bfulks@xxxxxxxxxxxx]
> Sent: Monday, July 17, 2000 8:05 AM
> To: Jess O'Leary
> Cc: omega-list@xxxxxxxxxx
> Subject: Re: Position sizing thoughts ...
>
>
> At 6:01 PM -0700 7/16/00, Jess O'Leary wrote:
>
> >...and I've come to the conclusion that something based on net
> >profits is what I want to use.
>
> This works OK if you leave all profits in your account. But most
> people tend to remove some of the profits so you might be happier
> basing the trade size on your account size rather than on net
> profits.
>
> >I read about one relatively simple strategy in Charlie Wright's book
> >that is based on net profits and goes something like this:
> >
> > AccountRisk = NetProfit * RiskPercent;
> > Num = AccountRisk / WorstCase;
> > If Num < 1 then Num = 1;
>
> I would tend to calculate the risk of each individual trade rather
> than use some worst-case value. Something like the following:
>
> AccountRisk = AccountSize * RiskPercent;
> TradeRisk = AbsValue(EntryPrice - StopPrice) * BigPointValue;
> Num = Floor(AccountRisk / TradeRisk);
>
> You will find that with many systems the TradeRisk varies
> significantly from trade to trade. Also, I would round the number of
> contracts down and not force the minimum of 1 contract. This will
> cause you to pass on any high-risk trades.
>
> Bob Fulks
>
>
>
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