|
PureBytes Links
Trading Reference Links
|
> 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).
Daily volatility is just a shorthand way of getting a handle on risk.
But your real risk is wherever you put your stop, however you determine
that stop level. It might be based on ATR, a support/resistance line, a
Donchian channel or whatever.
It seems to me that if you normalize your real risk across your
portfolio, the day to day volatility stuff will take care of itself. The
turtles use daily volatility to set both the stop and the trade size so
they are being consistent. If you change the turtle way of setting the
stop, you would probably want to make a corresponding change in the way
you calculate the number of contracts.
PS, we're just talking about the initial stop here. If you move your
stop in closer as the trade progresses, you wouldn't add more contracts
just because you moved the stop.
--
Dennis
|