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The formula I have is simpler than the formula you describe. It does look at
winpercent, win per winning trade, loss per losing trade, but it does not
contain any time parameter like the monthly division you describe below. I
have it coded in a C++ program, and in a Perl program, but the formula I use
is so simple so it could probably easily be put into easy language.
(winpercent-((1-winpercent)*loss per losing trade/win per winning trade)
That is my problem I think, the formula I have found is to simplified, and
does not do any time considerations. Thus my idea to exchange profits for
return on account, which makes it more based on monthly data. Tried that
yesterday night, but came up with a problem that seems to make that approach
to simplified as well.
The problem is that the losses are taken in quite short time (different
kinds of stops), but the profits are taken during a longer time span
(running profits). Thus, basing the formula on return on account makes stop
loss exits look unprofitable.
Is the more complete formula available somewhere?
> -----Original Message-----
> From: M. Simms [mailto:prosys@xxxxxxxxxxxxxxxx]
> Sent: den 21 juli 2000 05:44
> To: Bengtsson, Mats; omega-list@xxxxxxxxxx
> Subject: RE: Optimising trades using Kelly trade size formula
>
>
> If you've recoded the Kelly formula in Easy Language, I'd like to see
> it......I am still wrestling with all of the spreadsheet
> formulas. There
> were several bugs in early versions of this. It's quite involved.
>
> The problem with the Kelly approach is that key inputs are
> based on MONTHLY
> equity changes and MONTHLY max loss tolerated. All that needs
> to be done is
> to rework the inputs and related formulas to permit DAILY
> equity closed and
> open positions. Then, it's "K-Ching"....you're off to the
> bank......maybe.
> Kelly has a built-in leverage "governer" which makes it
> pretty conservative.
> However, with one move on the keyboard, you can remove
> it.....and watch
> those contracts go zoomin.
>
> What's impressive about Kelly is it effectively incorporates
> %win rate,
> win/loss ratio, and stop loss setting into the bet-size
> formula. Put the
> formula into your system, and each trade as well as new
> parameters such as
> stop loss value will result in an optimal bet for the next
> trade. At the
> begin of each trading day, just feed the system updated
> winrate and win/loss
> ratio and be sure to recalculate internally after each trade.
> Do this, and
> you'll have a "turn-key" system.
>
>
> > -----Original Message-----
> > From: Bengtsson, Mats [mailto:mats.bengtsson@xxxxxxxxxxxx]
> > Sent: Thursday, July 20, 2000 12:03 PM
> > To: omega-list@xxxxxxxxxx
> > Subject: Optimising trades using Kelly trade size formula
> >
> >
> > I found this formula, and it looked logical and nice. So I did
> > calculate it
> > for a number of backtested systems, and then found problems...
> >
> > The formula does not care at all about how long time the trade
> > takes. Making
> > 1000$ in trades averaging 5 days should be more worth than
> making 1000$ in
> > trades averaging 100 days. Is it just to exchange winperwinning
> > trade and so
> > on in the Kelly formula for return on account for winning
> trades? Or is
> > there another formula that does something similar to Kelly
> but also taking
> > number of days for the trades into account? (The Sharpe formula
> > is something
> > else, I am trying to get that into my system tests as well).
> >
> > --- Mats ---
> >
> >
>
>
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