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Why limit yourself to a binary choice
between just two alternatives? You can dream
up LOTS and LOTS of other position sizing
algorithms; why assume they are inferior
to FR and/or FF?
For example, I myself happen to use a position
sizing method in my real-money trading that is
a kind of a "hybrid" between FR and FF.
Risk-per-trade is a monotonically increasing
function of equity (similar to FF), but it is
definitely NOT a fixed fraction. Furthermore,
the method is "aggressive" -- it takes more risk --
when the account equity is small, and it becomes
less and less aggressive as the account grows
(similar to FR). Also similar to Randy McKay
in _New_Market_Wizards_.
The complete details of my approach were published
in Club 3000 News issue #99.04, which unfortunately
they don't give away for free. (They charge the
princely sum of Five Dollars for backissues, see
http://www.club3000.org )
Since #99.04 came out, I've found that people
seem to understand the position sizing method better
when it's presented as a CHART rather than as a
math formula. So I drew it up as a chart and put
it in the most recent Club 3000 News
(issue #2000.01). If you want, take a look.
Sources for other position sizing ideas besides
FR and FF:
1. "Trade Your Way to Financial Freedon" by Van Tharp.
2. "Trading Recipes" software by Bob Spear.
Go to http://www.moneymentor.com and scroll
the dingus on the left till you see SOFTWARE.
Click on Software Downloads, then click on
Trading Recipes
3. Russell Sands's "Turtle Trading Concepts" series
of 8 videotapes, from 1994 (cost $3,000).
4. "Quantitative Trading and Money Management"
by Fred Gehm.
5. "Portfolio Management Formulas" by Ralph Vince.
Look at the other, non-FF, methods that Ralph
claims that _Gamblers_Times_Magazine_ claims
are inferior. In *your* tests, using commodity
systems rather than Blackjack, are they inferior?
6. Pencil and graph paper and YOUR CREATIVITY.
--
Mark Johnson Silicon Valley, California mark@xxxxxxxxxxxx
"... The world will little note, nor long remember, what we
say here..." -- Abraham Lincoln, "The Gettysburg Address"
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