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Paul Zislis wrote:
>Following is a formula I know to be correct:
>
>NewSize = SQRT(2*CurrentProfit/delta + .25) + .5
This gives the same result as my formula:
NewSize = SQRT(2*NetProfit/delta + 1/4 + (StartSize^2 - 1))
when rounded to the nearest integer IntPortion(NewSize+0.5) and
when StartSize=1. I implemented it this way in ProSizer to account
for the initial lot size one starts with. You can't just take the
original Ryan Jones formula and add your initial size on the end,
because you will never trade less than the minimum size.
By putting StartSize inside the square root, NetProfit can go
negative for a bit, offset by the initial size, before the square
root argument goes completely negative. In this way the size to
trade gets reduced from your inital lot size down to 1 lot as the
NetProfit goes more negative.
>Also, the above formula is only the basic Fixed Ratio during equity
>runups. It is more complicated to implement the calculations for
>when your account is in a drawdown. Jones suggests several methods
>for handling drawdown.
If your equity is in a drawdown but not down to the original
starting level, the fixed ratio formula works fine in either
direction. The problem occurs when you get into a negative net
profit area. The original formula will keep trading your minimum
lot size all the way to zero if you let it. My modification of the
formula will trade less than your minimum lot size, to a minimum of
1 contract. Assuming of course that your minimum size started out
greater than 1.
--
,|___ Alex Matulich -- alex@xxxxxxxxxxxxxx
// +__> Director of Research and Development
// \
// __) Unicorn Research Corporation -- http://unicorn.us.com
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