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> I highly recommend "The Trading Game" by Ryan Jones. He gives
> some pros and
> cons of Optimal F and Fixed Fractional money management in
> general and then
> describes another approach which, to me, is more appealing.
>
> Paul
Paul and Ross,
I also recently read Ryan's _The Trading Game._ I found his historical
information of use and "Fixed Ratio" promising. However, I thought it was
too complex to implement with the elusive periodic reoptimization variable
(ratio to drawdown) you need to come up with. You will benefit from Larry
Williams' subsequent comments in _day trade futures online,_ 2000, p. 199
under "Ryan Jones and Fixed Ratio Trading."
Larry says on p. 200: "In talks with Ralph and Ryan, I became aware that
what was causing the wild gyrations was not the percent accuracy of the
system, nor was it the win/loss ratio or drawdown. The hitch and glitch came
from the largest losing trade and represents a critical concept."
Larry's simple answer was : contracts (or shares) to trade = (account
balance * risk percent )/ largest loss.
I personally prefer this over Jones' formula but I do not use either of
them. Frankly, both largest loss and DD can take you out. I came up with
another similar to Larry's that does not require reoptimization but grows
more explosively when the system is working.
Sincerely,
Wes Williams
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