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On Mar 1, 2:50pm, Dennis Holverstott wrote:
> > Risk of ruin is certainly something you should calculate
> > and be aware of, particularly if your money management system is telling you
> > to risk big money.
>
> Risk of ruin is the MOST important thing. That's where it all starts.
> Without that, none of the rest of it matters.
Ralph Vince's theory runs along the lines (1) all systems have a
non-zero risk of ruin, (2) optimal F gets your to your goal
th fastest, (3) the faster you get to the goal the better
chances you have (from an actuarial point of view). Of course,
if you aren't happy with your first billion from trading, you
may not have a goal, and if you don't have a goal, you may have
decided to be in the trading game forever, and this plan may
cause you to change your outlook on how to trade.
It seems that Optimal F's 'problem' is that it might
cause you to use too high a leverage by mis-estimating future
performance based upon past experience. The other unstated
assumption of many traders is they really can't tolereate the
let down of a 60% to 80% max. drawdown, which may be the
neighbrhood of max. drawdown where Optimal F takes you.
Another reason that traders prefer to back off of the actual
Optimal F.
`h
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