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Thank you, Dennis. You are truly the undisputed Master Mother Four-Qer ;-)
----- Original Message -----
From: "DH" <catapult@xxxxxxxxxxxxxxxxxx>
To: "Omega List" <omega-list@xxxxxxxxxx>
Sent: Thursday, July 25, 2002 10:38 PM
Subject: Re: Any Ryan Jones Money Management Fans?
> This has been covered before. As is often the case with these "experts,"
> they take a really simple concept, find a way to make it seem
> complicated, and then sell a book "explaining" the concept. For those
> who don't feel like wading through the books:
>
> Ralph Vince, fixed fractional
> contracts = constant * account_size
>
> Ryan Jones, fixed ratio
> contracts = constant * squareroot(account_size)
>
> Rewriting those formulas slightly:
> Vince: contracts = constant * power(account_size, 1)
> Jones: contracts = constant * power(account_size, .5)
>
> There you have it. The big difference is one uses a power of 1 and the
> other uses a power of .5.
>
> But hey! Maybe it's better to split the difference! I hereby proclaim
> that my secret power of 0.7 is the key to the universe. I'm going to
> hire Richard Josselin to go around the country teaching people that the
> secret to wealth is my formula:
>
> QQQQ (four-Q) Ratio: contracts = constant * power(account_size, .7)
>
> Disciples who master the beginners course will be eligible for my
> advanced course (for only $2,999 paid in advance) where they learn that
> .7 can be changed to something else. Flash (lightbulb comes on) we also
> need to consider the per-contract risk (max possible loss) of each trade
> in the formula.
>
> Four-Q Super Ratio:
> contracts = (constant/risk) * power(account_size, power_factor)
>
> Advance disciples will be let in on the ultimate secret (for only
> $29,999 paid in advance.). Flash (solar flare) we should define our max
> risk by using an adaptive volatility-based disaster stop.
>
> Four-Q Ultimate Formulas:
> risk = disaster_stop = constant * volatility
> contracts = (constant2/volatility) * power(account_size, power_factor)
>
> And there you have our ultimate position sizing formula. The rare
> students who master it will have discovered the Mother Lode and shall
> hereinafter be refered to, in hushed tones, as Mother Four-Qers. :-)
>
> Seriously though, that last one ain't bad. Assuming you use a volatility
> based stop, you can optimize for the terms "constant," "constant2" and
> "power_factor", as well as how you calculate the volatility, to find
> something that works pretty well for your particular system, goals and
> risk tolerance.
>
> The End
> Thank You
> Send Money
> Lots of it
>
> --
> Dennis
>
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