Re: [RT] a money management problem

[Glen Wallace <gcwallace@xxxxxxx>]

Kai:
 
I agree with Howard's suggestion to always err on 
the side of caution.  Fractional f will not maximize profits, but if you 
have underestimated your system's biggest loss or if you have a limited 
bankroll, you will not be wiped out.  
 
While trading at optimal f will maximize profits, 
it will also maximize drawdowns.  One of my favourite Ralph Vince 
quotes is, "Optimal f is like plutonium.  It gives you a tremendous amount 
of power, yet it is dreadfully dangerous."
 
 
 
<BLOCKQUOTE 
>
  ----- Original Message ----- 
  <DIV 
  >From: 
  YAO, 
  Kai 
  To: <A title=realtraders@xxxxxxxxxxxxxxx 
  href="">realtraders@xxxxxxxxxxxxxxx 
  
  Sent: Thursday, May 15, 2003 10:28 
  PM
  Subject: [RT] a money management 
  problem
  
  may 15, 2003
  
   
  dear group members,
   
  please excuse me for my audacious request. i have a problem 
  on money management for futures trading, but can not find someone familiar 
  with to give me advice. i have found this is a 
  professional group for the topic, so perhaps you are willing to do 
  me a favor. thanks.
   
  
  i have one problem about the optimal f. 
   
  for a trading system and a futures market, if 
  i have calculated the optimal f is 0.42 and the biggest loss is -3329.39 per 
  contract, the optimal f rule tells that for every 
  3329.39/0.42=7927.12 i have in my capital, i should make one 
  contract for biggest profit. 
   
  but if the margin level is 8% and the price for one contract 
  is about 120000, the margin is 120000*0.08=9600. that means for every 7927.12 
  i have, for biggest profit, i should buy one contract (9600 for margin), 
  which seems impossible. 
   
  even if i weaken the optimal f rule by "for every 9600 i 
  have, i can make one contract for big but not biggest profit", i can merely 
  afford for the margin, but the total margin for the total contracts will costs 
  all the capital i have, which also seems impossible. 
   
  if i use the half optimal f of 0.21, the margin and capital 
  conflict can be solved, but it will severely reduce the profit.
   
  the above is my problem about the optimal f. wish i 
  express myself clearly and my request does not make you too much 
  trouble.
   
  perhaps the developer of the method can 
  explain his/her optimal f more clearly. i have searched on the internet to 
  find ralph vince's email, but unfortunately failed. perhaps you have his/her 
  email and are willing to share with me. 
   
  i am not quite optimistic for solution, and only treat the 
  dead horse as if it were alive.
   
  sincerely,
   
  yao kai
   
  <FONT 
size=2>china






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