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Thomas,
Thank you for the informative post.
Speaking for myself only, Flexible/Dynamic Position Sizing is the single
most important enhancement I need from AmiBroker.
I am eagerly (and patiently) awaiting the improved backtest engine.
Cheers,
-Steve
-----Original Message-----
From: tchan95014 [mailto:tchan95014@x...]
Sent: Wednesday, October 30, 2002 5:02 PM
To: amibroker@xxxxxxxxxxxxxxx
Subject: [amibroker] Re: Dynamic Money Management
I completely agree with the quoted message.
TR is flexible enough to allow for almost any (risk) ideas you can
think of to do the position sizing: newrisk, volatility, margin,
market activities, group risk, group heat, portfolio risk / heat...
and yes, the portfolio level position sizing is the best feature. You
can even combine different systems each with different portfolio. It
is a DOS software but it is powerful.
Money management (or rather more accurately, position sizing or bet
sizing) is an area not very often discussed and not often appreciated.
I have posted some time ago, you can get some very detailed info from
TradingRecipes.com as well as traderclub.com by searching on "Mark
Johnson"
This gentleman was kind enough to post many of the ACTUAL works he
put in using TR.
1) He offered right there a very simple long term trend following
system that works for FREE.
2) He tested it using 1-contract with the worst possible fills you
can get
3) He test it using regular 1-contract test
4) He then tested it using TR with position sizing with a
portfolio of more than 10 or 15 futures contracts (You even get the
TR code for FREE too, it is so easy you can learn by reading it and
understand the logic behind it.)
5) He tested them over 10 or 20 years of history data.
It is an eye opening experience you do not want to miss.
He also listed his own trading results from actually following a
vendor system for 3 or 4 years, most people would agree it was
excellent results.
Go to both sites mentioned above and read as much as you can. If you
are interested in this subject, I have not found a better place for
education. All others only talk (including Tharp, although I have to
admit his book is OK), but you see hard numbers here.
While we are searching for a Holy grail system spending endless time
there, position sizing might offer a much easier path because it
optimizes the profit while controls the risk of your choice, you know
you can live long enough to earn your EXPECTANCY returns.
Wealth Lab is another software that claimed to have this capability
but again is never actually verified to be correct. (There was a long
debate, discussion and even tests on the trader club board about this
but was never actually confirmed whether it is working correctly.)
TR will cost you > $2000 while Athena, last heard, will cost you >
$40000 (that is right!) They were originated from the same idea and
might even be from the same group of persons (NOT Tharp though)
I think, AB even with its current capability is very close to be able
to do the portfolio level position sizing already. (with this
AddToComposit() for now. Do not quote me, it just came out of my
head.) I think Tomasz can do it in a very short time, the only issue
is to test it. It takes time to provide all the flexibility and iron
out all the bugs, it is a big challenge.
With current AB structure,I think it has paved ways for much more
flexibility than TR can ever provide. Monte Carlo, 2/3D surface chart
built in, any taker? ;-)
Bob from TR has promised a window version for years, but nothing has
come out yet.
Thomas
--- In amibroker@xxxx, "Al Venosa" <avcinci@xxxx> wrote:
> Tomasz:
>
> Yesterday, I posted a message on Van Tharp's forum about your plans
> to incorporate innovative money management and pyramiding
techniques
> in a future version of AB. Below is a response from a user of
Trading
> Recipes, who claims that TR is the only software that handles MM
> corrrectly. Here is what he said:
>
> "It DOES position sizing. the RIGHT way. I own the program and it
is
> GREAT. It took me about 5 minutes to get over the fact that it is
> still a DOS based app. But it's really the ONLY tool that does it
the
> correct way.
>
> I talked to AmiBroker about 6 months ago, and they told me the same
> thing. Plus once they do release the program with position sizing,
it
> still has to be proven that they have done it right.
>
> There are three other companies that I know have that have tried to
> do position sizing. Two of them got it wrong. www.rinasystems.com
and
> www.bhld.com
>
> The third is the athena program that is mentioned in Van's book. I
> haven't ever had the privilege of playing with that program, but I
> believe I read somewhere that it used output files from trade
> station. So, it would also fall into the category of a program that
> isn't truely implementing position sizing at the portfolio level
like
> Trading Recipes does."
>
> To explain what he meant by doing it 'the right way', here is what
he
> said:
>
> "TRADING RECIPES' approach lets you combine trading signals and
trade
> sizing strategies into simulations which exactly mimic the way you
> would trade in real time. A core feature, which sets it apart from
> all other "money management" (or backtesting) software, is its
> ability to perform dynamic money management (DMM) and risk control
at
> the portfolio level. With DMM, position sizes are determined with
> full knowledge of what's going on at the portfolio level at the
> moment the sizing decision is made. Just like you do in reality.
> Other software packages simply sum individual pre-calculated equity
> curves. This way, position sizes are calculated with no knowledge
of
> what the current portfolio conditions are at the crucial moment
when
> a position sizing decision is to be made. This is not how you would
> make decisions in reality and therefore such simulations offer no
> useful information to the trader. DMM avoids this pitfall."
>
> TJ, will your approach be able to do DMM as described above?
> Personally, I have no desire to use any program based on DOS. I
think
> the position sizing algorithm now included in AB does almost what
> this guy describes except for scaling in and out of trades and
basing
> one's decisions on the value of the entire portfolio of multiple
> stocks rather than a portfolio of one stock.
>
> Al V.
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