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Sharpe ratio. Then, how many contracts you trade, both in the backtest
and in real trading, is based on the size of the stop so you are only
risking a certain percentage of your account.
Dennis and Alex:
But what if you are trying to "equalize" all your positions in a
diversified portfolio...and so your trade size (number of contracts) is
based on attempting to equalize the daily dollar volatility of all
positions traded (this was the exact position sizing model that Richard
Dennis taught the turtles, and their stops were a straight 2 * 20 day ATR
-- NOT the "natural risk" of a Donchian channel breakout system, I would
think).
In your scenario, you base your position size on the "natural risk" of the
system...is there a way to accomplish both these objectives, ie equalizing
the dollar volatility of all your positions AT THE SAME TIME AS basing your
trade size on the natural risk of your system?
Thanks.
David
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