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In response to Troy's note below....the only thing that comes close
(that I've seen ) is the Commodity Selection Index by Welles Wilder.
It takes into account Directional movement, volatility, margin and
commissions
CSI=ADXRxATR14 [ V / square root of M x 1 / 150+C] 100
ADXR= avg directional movementrating
ATR14=14 day avg true range
V= value of .01 cent move of the ATR14 in dollars
M= margin require in dollars
C= commission in dollars
try it, mitch
Traders,
Greeks are typically applied to options to help determine risk/price
ect.
I am beginning to realize that a very important variable in trading is
the relationship of a number of important variables: primarily, account
size (which effects your stops), commission, slippage, volitility, time.
For example, when I first started trading I was risking 20 grand on a
small percentage stock move (4%), and on stocks that had low liquidity
and large spreads. I quickly learned this was not the thing to do. Now I
am learning that the E-mini is not a good vehicle for day trading due to
the high commission in relation to the point value of the contract.
Anyway, it seems as if there should be a formula to take all this into
account. The variable to manipulate would be time. If you are trading
stocks with such and such volitility and slippage, commission, (and
perhaps even system type i.e counter trend, trend following) then your
time variable should be X months. If you are trading the e-mini then it
should be X days.. Anyone every heard of a formula like this? If not,
someone should work on one.
Troy
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