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> Presumably the distribution of max profit and drawdown that you see when you use
> optimal f is outside your comfort zone, and presumably when the losses are all
> stacked up at the beginning of the sequence, your fixed fraction quickly becomes
> less than the minimum unit you can trade on the exchange.
The Monte Carlo will tell you how much money you need in your account
(plus margin requirements) to trade 1 contract (or 100 shares or
whatever) within your comfort zone.
Run the system on one contract and run the Monte Carlo on the profits
and losses to determine the likelyhood of a certain drawdown, e.g. 1%
chance of drawdown >= X, 10% chance of drawdown >= Y, 50% chance of
drawdown >= Z. Obviously X will be a bigger number than Z.
Now decide if you're a 0.1% risk of going broke kind of guy, or a 50%
risk of going broke kind of guy, or somewhere in between. That tells you
how much money you need for each contract if you trade a fixed fraction
of the account. If/when you make that much profit (plus margin
requirements), you can add another contract.
That's the simple version anyway. There are plenty of ways to make it
more complicated..... ;-)
--
Dennis
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